kwg-cb.htm

COMBINATION AGREEMENT

among

KWG RESOURCES INC.

and

SPIDER RESOURCES INC.

and

7569076 CANADA INC.

Dated as of June 11, 2010

COMBINATION AGREEMENT

THIS AGREEMENT made as of the 11th day of June, 2010

AMONG:

KWG RESOURCES INC., a corporation existing under the Companies Act (Quebec) (hereinafter referred to as “KWG”)

OF THE FIRST PART

– and –

SPIDER RESOURCES INC., a corporation existing under the Canada Business Corporations Act (hereinafter referred to as “Spider”)

OF THE SECOND PART

– and –

7569076 CANADA INC., a corporation existing under the Canada Business Corporations Act (hereinafter referred to as “Newco”)

OF THE THIRD PART

WITNESSES THAT:

WHEREAS KWG and Spider propose to complete a business combination by way of an amalgamation under the provisions of the CBCA (as hereinafter defined) of Spider and Newco, a wholly-owned Subsidiary (as hereinafter defined) of KWG;

AND WHEREAS KWG and Spider have previously entered into a binding letter agreement dated May 25, 2010 (the “Letter Agreement”) establishing the general terms for the business combination;

AND WHEREAS pursuant to the Letter Agreement, KWG and Spider agreed to negotiate, in good faith, a definitive agreement respecting such business combination, all of which are set forth in this Agreement;

NOW THEREFORE in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties hereto hereby covenant and agree as follows:

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ARTICLE 1

DEFINITIONS, INTERPRETATION AND SCHEDULES

1.1	Definitions

In this Agreement, unless the context otherwise requires, the following words and terms with the initial letter or letters thereof capitalized shall have the meanings ascribed to them below:

	(a)	“acting jointly or in concert” shall have the meaning ascribed to such expression under the Securities Act (Ontario);

	(b)	“affiliate” shall have the meaning ascribed to such term under the CBCA;

	(c)	“Agreement” means this combination agreement, together with the schedules attached hereto, as amended, amended and restated or supplemented from time to time;

	(d)	“Alternative Proposal” means, with reference to a Party, any inquiry, submission, proposal or offer regarding any merger, amalgamation, share exchange, business combination, take-over bid, sale or other disposition of material assets, recapitalization, reorganization, liquidation, sale or issuance of a material number of treasury securities or rights or interests therein or thereto or rights or options to acquire any material number of treasury securities (except upon the due exercise of convertible securities outstanding on the date hereof and, in the case of Spider, except pursuant to the Proposed Spider Financing, and, in the case of KWG, except pursuant to the Permitted KWG Flow-Through Conversion) or any type of similar transaction involving a Party or any of its Subsidiaries other than with the other Party;

	(e)	“Amalco” means the corporation resulting from the amalgamation of Spider and Newco pursuant to the Amalgamation;

	(f)	“Amalco Shares” means the common shares in the capital of Amalco;

	(g)	“Amalgamating Corporations” means Spider and Newco;

	(h)	“Amalgamation” means the amalgamation of Spider and Newco pursuant to section 181 of the CBCA on the terms and conditions set forth in this Agreement, subject to any amendment thereto in accordance herewith;

	(i)	“Amalgamation Application” means, collectively (i) a completed Form 2 - Initial Registered Office Address and First Board of Directors, (ii) a completed Form 9 - Articles of Amalgamation, (iii) a statutory declaration of an officer or director of each Amalgamating Corporation, (iv) a covering letter to Corporations Canada for an application for amalgamation, and (v) the applicable filing fee payable to the Receiver General for Canada;

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	(j)	“Business Day” means a day, other than a Saturday or Sunday, on which the principal commercial banks located in the City of Toronto, Ontario are open for business;

	(k)	“Canadian GAAP” means accounting principles generally accepted in Canada;

	(l)	“CBCA” means the Canada Business Corporations Act;

	(m)	“Change of KWG Recommendation” shall have the meaning ascribed thereto in Section 4.2(g)(iii);

	(n)	“Change of Spider Recommendation” shall have the meaning ascribed thereto in Section 4.1(a)(ii);

	(o)	“Cliffs” means Cliffs Natural Resources Inc.;

	(p)	“Cliffs KWG Bid” means any cash offer by Cliffs and/or any Person(s) acting jointly or in concert with Cliffs to purchase all of the outstanding KWG Common Shares at a price of $0.13 or less per share;

	(q)	“Cliffs Spider Bid” means any cash offer made by Cliffs and/or Person(s) acting jointly or in concert with Cliffs to purchase all of the outstanding Spider Common Shares at a price of $0.13 or less per share, including the cash offer of 7557558 Canada Inc., dated May 31, 2010, to purchase all of the outstanding Spider Common Shares at a price of $0.13 per share;

	®	“Completion Deadline” means the latest date by which the transactions contemplated by this Agreement are to be completed, which date shall be the later of July 19, 2010 and ten (10) days following the date of the latest scheduled Spider Meeting, or such other date as the Parties may agree;

	(s)	“Confidentiality Agreement” means the confidentiality agreement between KWG and Spider made effective as of May 25, 2010;

	(t)	“Debuts” means Debuts Diamonds Inc.;

	(u)	“disclosed by KWG” refers to disclosure of information, as the context requires, by KWG in this Agreement;

	(v)	“disclosed by Spider” refers to disclosure of information, as the context requires, by Spider in this Agreement;

	(w)	“Dissent Rights” means the rights of dissent in respect of the Amalgamation provided for in section 190 of the CBCA;

	(x)	“Effective Date” means the date shown on the certificate of amalgamation issued by the Registrar in respect of the Amalgamation in accordance with sections 185(4), 186 and 262(3) of the CBCA;

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(y)	“Effective Time” means the earliest moment on the Effective Date or such other time on the Effective Date as the parties hereto may agree in writing;

(z)	“Eligible Person” means a Person who:

	(i)	immediately prior to the completion of the Amalgamation, holds one or more Spider Options; and

	(ii)	following completion of the Amalgamation, would be eligible to participate under the KWG Stock Option Plan in accordance with the terms thereof;

(aa)	“Encumbrance” means any mortgage, pledge, assignment, charge, lien, claim, security interest, adverse interest, other third person interest or encumbrance of any kind, whether contingent or absolute, and any agreement, option, right or privilege (whether by law, contract or otherwise) capable of becoming any of the foregoing;

(bb)	“Exchange Ratio” means 1.21, subject to adjustment in accordance with Section 2.10;

(cc)	“Governmental Entity” means any applicable: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign; (ii) subdivision, agent, commission, board or authority of any of the foregoing; (iii) quasi-governmental or private body, including any tribunal, commission, regulatory agency or self-regulatory organization, exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; or (iv) stock exchange, including the TSXV;

(dd)	“KWG” shall have the meaning ascribed thereto on the first page of this Agreement;

(ee)	“KWG Alternative Proposal” means an Alternative Proposal in respect of KWG;

(ff)	“KWG Board” means the board of directors of KWG;

(gg)	“KWG Common Shares” means the authorized common shares in the capital of KWG;

(hh)	“KWG Financial Statements” shall have the meaning ascribed thereto in Section 3.3(i);

(ii)	“KWG Options” means the options of KWG, outstanding as of the close of business on June 9, 2010, to purchase an aggregate of up to 55,856,780 KWG Common Shares issued pursuant to the KWG Stock Option Plan;

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	(jj)	“KWG Public Documents” means the public documents filed by KWG since January 1, 2007 and available on SEDAR under KWG’s profile;

	(kk)	“KWG Shareholder Rights Plan” means the shareholder rights plan agreement between KWG and Computershare Investor Services Inc., as rights agent, dated May 25, 2010;

	(ll)	“KWG Shareholders” means, at any time, the holders of KWG Common Shares;

	(mm)	“KWG Stock Option Plan” means the existing stock option plan of KWG;

	(nn)	“KWG Subsidiaries” means, collectively, the Subsidiary corporations of KWG, as listed in Schedule “A” attached hereto;

	(oo)	“KWG Superior Proposal” means any bona fide written Alternative Proposal by a third party which was not solicited or encouraged by or on behalf of KWG on or after the date of this Agreement and did not otherwise result from a breach of KWG’s obligations under Section 6.3 or 6.4 and that the KWG Board determines in its good faith after consultation with its financial advisors and outside legal counsel would, if consummated in accordance with its terms, result in a transaction more favourable to the KWG Shareholders, from a financial point of view, than the terms of the Amalgamation;

	(pp)	“KWG Warrants” means the 184,537,494 common share purchase warrants of KWG, outstanding as of the close of business on June 9, 2010, to acquire an aggregate of up to 184,537,494 KWG Common Shares;

	(qq)	“Laws” means all laws, statutes, codes, ordinances, decrees, rules, regulations, by-laws, statutory rules, principles of law, published policies and guidelines, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, including general principles of common and civil law, and terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, statutory body or self regulatory authority, and the term “applicable” with respect to such Laws and in the context that refers to one or more Persons, means that such Laws apply to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Governmental Entity (or any other Person) having jurisdiction over the aforesaid Person or Persons or its or their business, undertaking, property or securities;

	(rr)	“Letter Agreement” shall have the meaning ascribed thereto on the first page of this Agreement;

	(ss)	“Material Adverse Change” means any one or more changes, effects, events, occurrences or states of facts that, either individually or in the aggregate, have, or would reasonably be expected to have, a Material Adverse Effect on the applicable Party and its Subsidiaries, if any, on a consolidated basis;

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	(tt)	“Material Adverse Effect” means any change, effect, event, occurrence or state of facts that, individually or in the aggregate, with other such changes, effects, events, occurrences or states of facts, is or would reasonably be expected to be material and adverse to the business, properties, operations, results of operations or financial condition of the applicable Party and its Subsidiaries, if any, on a consolidated basis, except any change, effect, event, occurrence or state of facts resulting from or relating to: (i) the announcement of the execution of this Agreement or the transactions contemplated hereby or the performance of any obligation hereunder or communication by the applicable Party of its plans or intentions with respect to the other Party and/or any of its Subsidiaries (if any); (ii) changes in the U.S. or Canadian economies in general or the Canadian or U.S. capital or currency markets in general; (iii) the threat, commencement, occurrence or continuation of any war, armed hostilities, acts of environmental or First Nations groups, civil strife, or acts of terrorism; (iv) any change in applicable Laws or in the interpretation thereof by any Governmental Entity provided that it does not have a materially disproportionate effect on the applicable Party relative to comparable mineral exploration companies; (v) any change in Canadian generally accepted accounting principles; (vi) any natural disaster, provided that it does not have a materially disproportionate affect on the applicable Party relative to comparable mineral exploration companies; (vii) any change in the price of base metals, precious metals, chromite or diamonds; (viii) any change relating to foreign currency exchange rates; (ix) changes affecting the mining industry generally, provided that such changes do not have a materially disproportionate effect on the applicable Party relative to comparable mineral exploration companies; or (x) any decrease in the market price or any decline in the trading volume of the common shares of the applicable Party on the TSXV (it being understood that the causes underlying such change in market price or trading volume may be taken into account in determining whether a Material Adverse Effect has occurred);

	(uu)	“New KWG Option” shall have the meaning ascribed thereto in Section 2.5(a);

	(vv)	“Newco” shall have the meaning ascribed thereto on the first page of this Agreement;

	(ww)	“Newco Shares” means common shares in the capital of Newco;

	(xx)	“Party” shall mean, as the context requires, either KWG or Spider and “Parties” shall mean both of them;

	(yy)	“Permitted KWG Flow-Through Conversion” means, subject to the approval of any applicable Governmental Entity and any other required approval, the amendment of all or part of the KWG Warrants to permit the holders thereof to purchase “flow-through” KWG Common Shares;

	(zz)	“Person” means any individual, firm, partnership, joint venture, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body

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		corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status;

	(aaa)	“Proposed Spider Financing” means, further to a price reservation form submitted by Spider to the TSXV on May 14, 2010, a private placement of units of Spider at $0.08 per unit, for aggregate gross proceeds of up to $750,000, with each unit consisting of one “flow-through” Spider Common Share and one warrant to purchase one “non-flow-through” Spider Common Share, each such warrant exercisable at $0.10 from the date of issuance of such warrant;

	(bbb)	“Proxy Circular” means the management information circular of Spider dated June 11, 2010;

	(ccc)	“Registrar” means the Director General of Corporations Canada, the administrator of the CBCA;

	(ddd)	“Securities Authorities” means the securities commissions and/or other securities regulatory authorities in the provinces and territories of Canada, collectively, applicable to KWG or Spider, as the case may be;

	(eee)	“SEDAR” means the System for Electronic Document Analysis and Retrieval;

	(fff)	“Spider” shall have the meaning ascribed thereto on the first page of this Agreement;

	(ggg)	“Spider Agreements” has the meaning ascribed thereto in Section 3.1(b);

	(hhh)	“Spider Alternative Proposal” means an Alternative Proposal in respect of Spider;

	(iii)	“Spider Board” means the board of directors of Spider;

	(jjj)	“Spider Common Shares” means the authorized common shares in the capital of Spider;

	(kkk)	“Spider Convertible Securities” means the Spider Unit Compensation Options, Spider Options, Spider Unit Warrants and Spider Warrants;

	(lll)	“Spider Financial Statements” shall have the meaning ascribed thereto in Section 3.1(i);

	(mmm)	“Spider Meeting” means the special meeting, including any adjournments or postponements thereof permitted by this Agreement, of the Spider Shareholders to be held to consider and, if deemed advisable, to approve the Spider Resolution;

	(nnn)	“Spider Options” means those options of Spider issued pursuant to the Spider Stock Option Plan, outstanding as of the close of business on June 9, 2010, to purchase an aggregate of up to 31,185,018 Spider Common Shares set out in

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		Schedule “B” hereto and each of which entitles the holder to purchase one (1) Spider Common Share;

	(ooo)	“Spider Public Documents” means the public documents filed by Spider since January 1, 2007 and available on SEDAR under Spider’s profile;

	(ppp)	“Spider Resolution” means the special resolution approving the Amalgamation and this Agreement substantially in the form attached hereto as Schedule “C”;

	(qqq)	“Spider Shareholder Approval” shall mean that a majority of not less than two-thirds of the votes cast in respect of the Spider Resolution by Spider Shareholders entitled to vote on the Spider Resolution, present, in person or by proxy, at the Spider Meeting shall have been voted in favour of such resolution;

	(rrr)	“Spider Shareholder Rights Plan” means the shareholder rights plan agreement between Spider and Equity Transfer & Trust Company, as rights agent, dated as of May 8, 2009;

	(sss)	“Spider Shareholders” means, at any time, the holders of Spider Common Shares;

	(ttt)	“Spider Stock Option Plan” means the existing stock option plan of Spider;

	(uuu)	“Spider Superior Proposal” means any bona fide written Alternative Proposal by a third party which was not solicited or encouraged by or on behalf of Spider on or after the date of this Agreement and did not otherwise result from a breach of Spider’s obligations under Section 6.1 or 6.2 and that the Spider Board determines in its good faith after consultation with its financial advisors and outside legal counsel would, if consummated in accordance with its terms, result in a transaction more favourable to the Spider Shareholders, from a financial point of view, than the terms of the Amalgamation;

	(vvv)	“Spider Unit” means a unit of Spider comprised of one Spider Common Share and one Spider Unit Warrant;

	(www)	“Spider Unit Compensation Options” means those compensation options of Spider, outstanding as of the close of business on June 9, 2010, to purchase an aggregate of up to 182,108 Spider Units set out in Schedule “B” hereto;

	(xxx)	“Spider Unit Warrant” means a common share purchase warrant of Spider entitling the holder thereof to purchase one Spider Common Share at an exercise price of $0.10 per Spider Common Share until December 30, 2011;

	(yyy)	“Spider Warrants” means those warrants of Spider, outstanding as of the close of business on June 9, 2010, to purchase an aggregate of up to 81,411,661 Spider Common Shares set out in Schedule “B” hereto;

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(zzz)	“Spinoff” means collectively:

	(i)	the cancellation of all of the warrants to purchase common shares of Debuts held by KWG;

	(ii)	the contribution by KWG to Debuts of all of the shares of each of Canada Chrome Corporation and 7207565 Canada Inc. (which hold KWG’s interest in the railway right of way and its 50% interest in the 2% net smelter returns royalty granted by Freewest Resources Canada Inc. to Richard Nemis pursuant to an agreement entered into on June 30, 2003, as amended by agreement among such Persons and KWG made as of July 21, 2009) and $500,000;

	(iii)	the transfer by Debuts to KWG, in recognition of the aforesaid contribution, of Debuts’ interest in various diamond exploration projects;

	(iv)	the agreement of KWG to pay $2,000,000 to Debuts in consideration of Debuts issuing, from time to time, upon the exercise of KWG Warrants, common shares of Debuts to any holder of such KWG Warrants who has duly exercised the same (or to KWG for subsequent delivery thereof to such holder) in order to satisfy the obligation of KWG to deliver common shares of Debuts to a holder upon its exercise of KWG Warrants, such payment to be made out of 20% of the subscription proceeds received by KWG from each exercise of a KWG Warrant occurring on or after the date hereof;

	(v)	the subdivision of the common shares of Debuts on such basis as may be determined by KWG; and

	(vi)	the declaration by KWG of a dividend in kind of all of the outstanding common shares of Debuts held by KWG to the shareholders of record of KWG on a date, fixed by KWG, preceding the Effective Date;

(aaaa)	“Subsidiary” has that meaning as set out in section 2(5) of the CBCA;

(bbbb)	“Superior Proposal” means, in respect of KWG, a KWG Superior Proposal and, in respect of Spider, a Spider Superior Proposal;

(cccc)	“take-over bid” shall have the meaning ascribed to such term under the Securities Act (Ontario);

(dddd)	“Tax” and “Taxes” means all taxes, assessments, charges, dues, duties, rates, fees, imposts, levies and similar charges of any kind lawfully levied, assessed or imposed by any Governmental Entity, including all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all capital taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes, value added taxes, transfer taxes (including, without limitation, taxes

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		relating to the transfer of interests in real property or entities holding interests therein), franchise taxes, license taxes, withholding taxes, payroll taxes, employment taxes, Canada Pension Plan premiums, excise, severance, social security, workers’ compensation, employment insurance or compensation taxes or premium, stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or add-on minimum taxes, goods and services tax, customs duties or other taxes, fees, imports, assessments or charges of any kind whatsoever, together with any interest and any penalties or additional amounts imposed by any taxing authority (domestic or foreign) on such entity, and any interest, penalties, additional taxes and additions to tax imposed with respect to the foregoing;

	(eeee)	“Tax Act” means the Income Tax Act (Canada), as amended and the regulations thereunder, as amended;

	(ffff)	“Tax Returns” means all returns, schedules, elections, declarations, reports, information returns, notices, forms, statements and other documents made, prepared or filed with any taxing authority or required to be made, prepared or filed with any taxing authority relating to Taxes;

	(gggg)	“Termination Date” means, subject to Section 7.4(a)(X) or 7.5(a)(Y), as applicable, the date upon which this Agreement is terminated pursuant to Section 7.3;

	(hhhh)	“TSXV” means the TSX Venture Exchange;

	(iiii)	“United States” or “U.S.” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;

	(jjjj)	“U.S. Holder” means a “U.S. holder” as that term is defined in Rule 800 under the 1933 Act;

	(kkkk)	“1933 Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder;

	(llll)	“1934 Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time to time thereunder; and

	(mmmm)	“1940 Act” means the United States Investment Company Act of 1940, as amended, and the rules and regulations promulgated from time to time thereunder.

In addition, words and phrases used herein and defined in the CBCA shall have the same meaning herein as in the CBCA unless the context otherwise requires.

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1.2	Interpretation Not Affected by Headings

The division of this Agreement into articles, sections, subsections, paragraphs and subparagraphs and the insertion of headings herein are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions refer to this Agreement and the schedules attached hereto and not to any particular article, section or other portion hereof and include any agreement, schedule or instrument supplementary or ancillary hereto or thereto.

1.3	Number and Gender

In this Agreement, unless the context otherwise requires, words importing the singular only shall include the plural and vice versa and words importing the use of either gender shall include both genders and neuter.

1.4	Date for any Action

If the date on which any action is required to be taken hereunder by any party hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day.

1.5	Statutory References

Any reference in this Agreement to a statute includes all regulations and rules made thereunder, all amendments to such statute or regulation in force from time to time and any statute or regulation that supplements or supersedes such statute or regulation.

1.6	Currency

Unless otherwise stated, all references in this Agreement to dollar amounts are expressed in Canadian currency.

1.7	Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable Laws, the parties hereto waive any provision of Law that renders any provision of this Agreement or any part thereof invalid or unenforceable in any respect. The parties hereto will engage in good faith negotiations to replace any provision hereof or any part thereof that is declared invalid or unenforceable with a valid and enforceable provision or part thereof, the economic effect of which approximates as much as possible the invalid or unenforceable provision or part thereof that it replaces.

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1.8	Accounting Matters

Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings attributable thereto under Canadian GAAP and all determinations of an accounting nature required to be made hereunder shall be made in a manner consistent with Canadian GAAP.

1.9	Knowledge

Where the phrases “to the knowledge of KWG” or “to KWG’s knowledge” or “to the knowledge of Spider” or “to Spider’s knowledge” are used in respect of KWG, the KWG Subsidiaries or Spider, such phrase shall mean, in respect of each representation and warranty or other statement which is qualified by such phrase, that such representation and warranty or other statement is being made based upon: (A) in the case of KWG and the KWG Subsidiaries, the actual knowledge of Frank Smeenk; and (B) in the case of Spider, the actual knowledge of Neil Novak.

1.10	Meaning of Certain Phrase

In this Agreement the phrase “in the ordinary and regular course of business” shall mean and refer to those activities that are normally conducted by corporations engaged in the exploration, development, mining and production of diamonds and precious and base metals.

1.11	Schedules

The following schedules are attached to, and are deemed to be incorporated into and form part of, this Agreement:

	Schedule	Matter
	A	Description of KWG Subsidiaries
	B	Description of Spider Convertible Securities
	C	Form of Spider Resolution
	D	Initial Directors of Amalco

ARTICLE 2

THE AMALGAMATION

2.1	Newco

Prior to the Effective Time, KWG shall transfer all Spider Common Shares held by it to Newco.

KWG, in its capacity as the sole shareholder of Newco, shall cause Newco to have the following provisions included in the articles and by-laws of Newco on the Effective Date:

	(a)	authority to issue an unlimited number of shares designated as common shares (being the Newco Shares);

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	(b)	a minimum of one (1) director and a maximum of twenty (20) directors; and

	(c)	no restrictions on business.

2.2	Amalgamation

Pursuant and subject to the detailed steps contained in this Agreement and subject to the satisfaction of the terms and conditions of this Agreement, and in accordance with the applicable provisions of the constating documents of Spider, Newco and KWG and the provisions of the CBCA and applicable securities Laws, at the Effective Time:

	(a)	Newco and Spider will amalgamate and continue as one company under the terms and conditions of this Agreement and articles and by-laws of Newco;

	(b)	each Spider Common Share held by Newco shall be cancelled without any repayment of capital in respect thereof;

	(c)	each outstanding Spider Common Share (other than Spider Common Shares held by a Spider Shareholder who has validly exercised its Dissent Rights and who is ultimately entitled to be paid fair value for its Spider Common Shares and other than the Spider Common Shares beneficially owned by Newco) will be exchanged for that number of KWG Common Shares equal to the Exchange Ratio, and:

		(i)	such holder shall cease to be a Spider Shareholder and the name of such holder shall be removed from the central securities register of holders of Spider Common Shares;

		(ii)	KWG shall issue from the treasury and cause to be delivered to such Spider Shareholder the KWG Common Shares to which such holder is entitled as aforesaid and the name of such holder shall be added to the central securities register of holders of KWG Common Shares showing such holder as the registered holder of the KWG Common Shares so issued; and

		(iii)	each Spider Common Share so exchanged shall be cancelled and an equivalent number of Amalco Shares shall be issued to KWG;

	(d)	all Newco Shares shall be converted on a share for share basis into fully paid and non-assessable Amalco Shares on the basis of one (1) fully paid and non-assessable Amalco Share for each one (1) Newco Share;

	(e)	Amalco shall be a wholly-owned Subsidiary of KWG;

	(f)	the property, rights and interests of each of Newco and Spider will continue to be the property, rights and interests of Amalco;

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	(g)	Amalco will have, as its articles, articles substantially in the form of the articles of Newco, which will include the following provisions:

		(i)	Name. The name of Amalco shall be “Spider Resources Inc.”;

		(ii)	Registered office. The registered office of Amalco shall be located in Ontario;

		(iii)	Authorized Capital. Amalco will be authorized to issue an unlimited number of shares designated as common shares;

		(iv)	Number of Directors. The minimum number of directors of Amalco shall be one (1) and the maximum number of directors of Amalco shall be twenty (20);

		(v)	Restrictions of Business. There shall be no restrictions on the business that Amalco may carry on; and

	(h)	Amalco will have, as its by-laws, the by-laws of Newco; and

	(i)	the initial board of directors of Amalco will be comprised of the individuals set forth in Schedule “D” hereto.

2.3	No Fractional KWG Common Shares

No fractional KWG Common Shares will be issued pursuant to the Amalgamation and the aggregate number of KWG Common Shares issuable to a Spider Shareholder who would otherwise be entitled to a fraction of a KWG Common Share (taking into account the aggregate number of Spider Common Shares beneficially owned by such Spider Shareholder) will be rounded up to the nearest whole number.

2.4	Effective Time

The Amalgamation shall become effective at the Effective Time.

2.5	Spider Options and Post-Amalgamation KWG Board and Management

As soon as practicable following completion of the Amalgamation:

	(a)	each outstanding Spider Option held by an Eligible Person who has consented, prior to the Effective Date, to the exchange of his Spider Options for New KWG Options will, subject to, and in accordance with, the terms and conditions of the KWG Stock Option Plan, be exchanged for an option of KWG (a “New KWG Option”) exercisable to acquire that number of KWG Common Shares equal to the Exchange Ratio at an exercise price per KWG Common Share determined by KWG on the Effective Date in accordance with the terms and conditions of the KWG Stock Option Plan, it being acknowledged and agreed by each of the parties hereto that:

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		(i)	following completion of the Amalgamation:

			(A)	any exercise of a Spider Option by a Person, other than an Eligible Person who has provided the consent contemplated above, shall be effected in accordance with the terms and conditions of this Agreement, the Spider Stock Option Plan and the option agreement pursuant to which such Spider Option was granted; and

			(B)	each Spider Option held by a Person, other than an Eligible Person who has provided the consent contemplated above, shall expire in accordance with the terms and conditions of the Spider Stock Option Plan and the option agreements pursuant to which such Spider Option was granted; and

		(ii)	all such exchanges of Spider Options for New KWG Options (including the exercise price thereof and the number of KWG Common Shares issuable pursuant thereto) shall be subject to the rules and approval of the TSXV;

	(b)	a meeting of the KWG Board shall be convened and held in order to:

		(i)	change the composition of the KWG Board such that it will be comprised of the following individuals: Norman Brewster, René Galipeau, Neil Novak, Bruce Reid, Frank Smeenk and Bryan Wilson; and

		(ii)	appoint Frank Smeenk as Executive Chairman of KWG and Neil Novak as President of KWG;

	(c)	KWG shall:

		(i)	offer to engage those officers and directors of each of KWG and Spider who, following completion of the Amalgamation, will not continue as officers or directors of KWG and/or Amalco to provide transitional consulting services to KWG for a period of one (1) year from the Effective Date; and

		(ii)	enter into consulting agreements in respect of such transitional services, on terms and conditions satisfactory to KWG, with such non-continuing officers and directors who have accepted such offer; and

	(d)	the KWG Board shall endeavour to effect a change of KWG’s corporate name to “Spider-KWG Resources Inc.”.

2.6	Consultation

KWG and Spider will consult with each other in issuing any press release or otherwise making any public statement with respect

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to this Agreement or the Amalgamation and in making any filing with any Governmental Entity, Securities Authority or stock exchange with respect thereto. Each of KWG and Spider shall use its commercially reasonable efforts to enable the other of them to review and comment on all such press releases and filings prior to the release or filing, respectively, thereof, provided, however, that the obligations herein will not prevent a Party from making, after consultation with the other Party, such disclosure as is required by applicable Laws or the rules and policies of any applicable stock exchange. This Section 2.6 shall not apply to any public statement made by Spider pursuant to Section 6.1(f) or by KWG pursuant to Section 6.3(f).

In connection with any injunction or restraining order or other order or action challenging or affecting this Agreement, the transactions contemplated hereby or seeking to enjoin or delay the closing of, or otherwise adversely affecting the ability of the Parties to consummate, the transactions contemplated hereby, including, without limitation, any matter arising in connection with the Spider Shareholder Rights Plan or the KWG Shareholder Rights Plan, Spider or KWG, as applicable, will provide prompt notice thereof to the other in respect of such injunction, order, action or matter and will consult with the other regarding the same. Each Party shall use its commercially reasonable efforts to permit the other to attend any proceedings of a Governmental Entity before which it is to appear with respect to the Spider Shareholder Rights Plan, the KWG Shareholder Rights Plan, the Cliffs Spider Bid, any Cliffs KWG Bid, or any take-over bid in respect of the securities of itself or the other Party.

2.7	Effecting the Amalgamation

Subject to the rights of termination contained in Article 7, upon the Spider Shareholder Approval being obtained and the other conditions contained in Article 5 being complied with or waived, Spider and Newco shall file with the Registrar the Amalgamation Application and such other documents as may be required in order to effect the Amalgamation.

2.8	Closing

The closing of the Amalgamation will take place at the offices of Macleod Dixon LLP, 79 Wellington Street West, Suite 2300, Toronto, Ontario at 8:30 a.m. (Toronto time) on the Effective Date or such other time as the Parties may agree.

2.9	Post-Amalgamation Exercises

Subject to Section 2.5(a) and receipt by KWG of the agreement contemplated in Section 4.1(u) executed by the applicable Person, each of the parties hereto acknowledges and agrees that, following completion of the Amalgamation, upon the valid exercise of any Spider Convertible Security or any other right to acquire securities of Spider pursuant to any of the Spider Agreements and the payment to Amalco of the subscription price therefor, Amalco will transfer such subscription price to KWG in consideration of KWG issuing to the holder of such Spider Convertible Security or other right to acquire securities of Spider that number of KWG Common Shares equal to the Exchange Ratio or, as applicable, other securities of KWG as determined in accordance with the terms and conditions of this Agreement and, as applicable, such Spider Convertible Security or Spider Agreement; provided, however, that all such exercises of Spider Convertible Securities or other rights to acquire securities of Spider pursuant to any of the Spider Agreements (including the exercise price thereof and, as applicable, the

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number of KWG Common Shares or other securities of KWG issuable pursuant thereto) shall be subject to the rules and approval of the TSXV.

2.10	Adjustment of Exchange Ratio

Each of the Parties acknowledges and agrees that if, at any time on or after the date hereof and before the Effective Time, any of the following events occur, on the Effective Date an adjustment will be made to the “Exchange Ratio” as follows:

	(a)	Spider Shareholder Rights Plan Triggered and KWG Shareholder Rights Plan not Triggered: If Spider Common Shares are issued or made issuable by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time (but KWG Common Shares are not issued or made issuable before the Effective Time by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time), the “Exchange Ratio” shall be adjusted to equal a value calculated as 1.21 multiplied by an amount (the “Spider Rights Adjustment Factor”) equal to:

		(i)	the sum of:

			(A)	the number of outstanding Spider Common Shares calculated on a fully-diluted basis as at the close of business on the date hereof (without taking into account Spider Common Shares issued or made issuable by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time); and

			(B)	0.5 multiplied by the number of Spider Common Shares issued or made issuable after the date hereof and before the Effective Time by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time);

		divided by

		(ii)	the sum of:

			(A)	the number of outstanding Spider Common Shares calculated on a fully-diluted basis as at the close of business on the date hereof (without taking into account Spider Common Shares issued or made issuable by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time); and

			(B)	the number of Spider Common Shares issued or made issuable after the date hereof and before the Effective Time by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time);

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(b)	KWG Shareholder Rights Plan Triggered and Spider Shareholder Rights Plan not Triggered: If KWG Common Shares are issued or made issuable by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time (but Spider Common Shares are not issued or made issuable before the Effective Time by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time), the “Exchange Ratio” shall be adjusted to equal a value calculated as 1.21 multiplied by an amount (the “KWG Rights Adjustment Factor”) equal to:

	(i)	the sum of:

		(A)	the number of outstanding KWG Common Shares calculated on a fully-diluted basis as at the close of business on the date hereof (without taking into account KWG Common Shares issued or made issuable by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time); and

		(B)	the number of KWG Common Shares issued or made issuable after the date hereof and before the Effective Time by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time);

	divided by

	(ii)	the sum of:

		(A)	the number of outstanding KWG Common Shares calculated on a fully-diluted basis as at the close of business on the date hereof (without taking into account KWG Common Shares issued or made issuable by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time); and

		(B)	0.5 multiplied by the number of KWG Common Shares issued or made issuable after the date hereof and before the Effective Time by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time); or

(c)	Spider Shareholder Rights Plan Triggered and KWG Shareholder Rights Plan Triggered: If Spider Common Shares are issued or made issuable by reason of a Flip-in Event (as defined in the Spider Shareholder Rights Plan) having occurred before the Effective Time and KWG Common Shares are issued or made issuable by reason of a Flip-in Event (as defined in the KWG Shareholder Rights Plan) having occurred before the Effective Time, the “Exchange Ratio” shall be adjusted to equal a value calculated as 1.21 multiplied by the product of the Spider Rights Adjustment Factor and the KWG Rights Adjustment Factor.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1	Representations and Warranties of Spider

Spider hereby represents and warrants to KWG and hereby acknowledges that KWG is relying upon such representations and warranties in connection with entering into this Agreement and agreeing to complete the Amalgamation, as follows:

	(a)	Organization. Spider has been incorporated, is subsisting and has full corporate and legal power and authority to own its property and assets and to conduct its business as currently owned and conducted. Spider is registered, licensed or otherwise qualified as an extra-provincial corporation or a foreign corporation in each jurisdiction where the nature of the business or the location or character of the property and assets owned or leased by it requires it to be so registered, licensed or otherwise qualified, other than those jurisdictions where the failure to be so registered, licensed or otherwise qualified would not have a Material Adverse Effect on Spider.

	(b)	Capitalization. Spider is authorized to issue an unlimited number of Spider Common Shares. As of the close of business on June 9, 2010, there were outstanding:

		(i)	541,737,009 Spider Common Shares (and associated rights under the Spider Shareholder Rights Plan);

		(ii)	Spider Options to acquire an aggregate of up to 31,185,018 Spider Common Shares;

		(iii)	Spider Warrants to acquire an aggregate of up to 81,411,661 Spider Common Shares; and

		(iv)	182,108 Spider Unit Compensation Options.

		Except for (W) the Spider Convertible Securities, (X) the securities issuable pursuant to (1) the option agreement made as of May 25, 2010 between Greenstone Exploration Co. Ltd. and Spider, (2) the investor relations consulting agreement made December 1, 2009 between Investor Cubed Inc. and Spider and (3) the marketing and communications agreement made September 5, 2008 between RM Communications Inc. and Spider (as the foregoing agreements exist on the date hereof) (collectively, the “Spider Agreements”), (Y) the securities issuable pursuant to the Proposed Spider Financing and (Z) the securities issuable under the Spider Shareholder Rights Plan, as of the date hereof, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating Spider to issue or sell any shares of Spider or any securities or obligations of any kind convertible into or exchangeable for any shares of Spider. All outstanding Spider Common Shares have been authorized and are validly issued and outstanding as fully paid

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	and non-assessable shares, free of pre-emptive rights. As of the date hereof there are no outstanding bonds, debentures or other evidences of indebtedness of Spider. There are no outstanding contractual obligations of Spider to repurchase, redeem or otherwise acquire any outstanding Spider Common Shares or with respect to the voting or disposition of any outstanding Spider Common Shares.

(c)	Authority. Spider has all necessary corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by Spider as contemplated by this Agreement, and to perform its obligations hereunder and under such other agreements and instruments. The execution and delivery of this Agreement by Spider and the completion by Spider of the transactions contemplated by this Agreement have been authorized by the Spider Board and, subject to obtaining the Spider Shareholder Approval and the approval of the TSXV in the manner contemplated herein, no other corporate proceedings on the part of Spider are necessary to authorize this Agreement or to complete the transactions contemplated hereby other than in connection with the approval by the Spider Board of the Proxy Circular and other than the filing of the Amalgamation Application with the Registrar. This Agreement has been executed and delivered by Spider and constitutes a legal, valid and binding obligation of Spider, enforceable against Spider in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other applicable Laws relating to or affecting creditors’ rights generally, and to general principles of equity. The execution and delivery by Spider of this Agreement and the performance by Spider of its obligations hereunder and the completion of the transactions contemplated hereby, do not and will not:

	(i)	result in a violation, contravention or breach of or constitute a default under, or entitle any party to terminate, accelerate, modify or call any obligations or rights under, require any consent to be obtained under or give rise to any termination rights under any provision of:

		(A)	the articles or by-laws of Spider,

		(B)	any applicable Law or rule or policy of the TSXV (except that the approval of the TSXV, which is required for the completion by Spider of the transactions contemplated hereby, has been applied for by Spider but not obtained as of the date hereof), or

		(C)	any credit arrangement, note, bond, mortgage, indenture, deed of trust, lease, franchise, concession, easement, contract, agreement, licence, permit or other instrument to which Spider is bound or is subject to or of which Spider is the beneficiary;

		in each case, which would, individually or in the aggregate, have a Material Adverse Effect on Spider,

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	(ii)	cause any indebtedness owing by Spider to come due before its stated maturity or cause any available credit to cease to be available which would, individually or in the aggregate, have a Material Adverse Effect on Spider;

	(iii)	result in the imposition of any Encumbrance upon any of the property or assets of Spider or give any Person the right to acquire any of Spider’s assets, or restrict, hinder, impair or limit the ability of Spider to conduct the business of Spider as and where it is now being conducted which would, individually or in the aggregate, have a Material Adverse Effect on Spider; or

	(iv)	result in or accelerate the time for payment or vesting of, or increase the amount of any severance, unemployment compensation, “golden parachute”, bonus, termination payments, retention bonus or otherwise, becoming due to any director or officer of Spider or increase any benefits otherwise payable under any pension or benefits plan of Spider or result in the acceleration of the time of payment or vesting of any such benefits.

	No consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity or other Person is required to be obtained by Spider in connection with the execution and delivery of this Agreement or the consummation by Spider of the transactions contemplated hereby other than (i) filings required under the CBCA, (ii) filings with and approvals required by the Securities Authorities and stock exchanges (including the approval referred to in Section 3.1I(i)(B)), and (iii) any other consents, approvals, orders, authorizations, declarations or filings which, if not obtained, would not, individually or in the aggregate, have a Material Adverse Effect on Spider.

(d)	Directors’ Approvals. The Spider Board has:

	(i)	determined that the Amalgamation is in the best interests of Spider;

	(ii)	determined to recommend that the Spider Shareholders vote in favour of the Spider Resolution; and

	(iii)	authorized the entering into of this Agreement, and the performance of Spider’s obligations hereunder.

(e)	Subsidiaries. Spider has no Subsidiaries.

(f)	No Defaults. Spider is not in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute a default by Spider under any contract, agreement or licence that is material to the conduct of the business of Spider to which it is a party or by which it is bound that would, individually or in the aggregate, have a Material Adverse Effect on Spider.

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(g)	Absence of Changes. Except as disclosed in the Spider Public Documents, since March 31, 2010:

	(i)	Spider has conducted its business only in the ordinary and regular course of business consistent with past practice;

	(ii)	Spider has not incurred or suffered a Material Adverse Change;

	(iii)	there has not been any acquisition or sale by Spider of any material property or assets thereof;

	(iv)	other than in the ordinary and regular course of business consistent with past practice, there has not been any incurrence, assumption or guarantee by Spider of any debt for borrowed money, any creation or assumption by Spider of any Encumbrance, any making by Spider of any loan, advance or capital contribution to or investment in any other Person or any entering into, amendment of, relinquishment, termination or non-renewal by Spider of any contract, agreement, licence, lease transaction, commitment or other right or obligation that would, individually or in the aggregate, have a Material Adverse Effect on Spider;

	(v)	Spider has not declared or paid any dividends or made any other distribution in respect of any of the Spider Common Shares;

	(vi)	Spider has not effected or passed any resolution to approve a split, consolidation or reclassification of any of the outstanding Spider Common Shares;

	(vii)	other than in the ordinary and regular course of business consistent with past practice, there has not been any material increase in or modification of the compensation payable by Spider to its directors, officers, employees or consultants or any grant to any such director, officer, employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement (including, without limitation, the granting of Spider Options pursuant to the Spider Stock Option Plan) made to, for or with any of such directors, officers, employees or consultants (other than the grant of 750,000 Spider Options to Hubert Marleau);

	(viii)	Spider has not effected any material change in its accounting methods, principles or practices, other than as disclosed in the Spider Public Documents; and

	(ix)	Spider has not adopted any, or materially amended any, collective bargaining agreement, bonus, pension, profit sharing, stock purchase, stock option or other benefit plan or shareholder rights plan.

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(h)	Employment Agreements. Spider:

	(i)	is not a party to any written or oral policy, agreement, obligation or understanding providing for retention bonuses, severance or termination payments to, or any employment or consulting agreement with, any director or officer of Spider that would be triggered by Spider’s entering into this Agreement or the completion of the Amalgamation;

	(ii)	does not have any employee or consultant whose employment or contract with Spider cannot be terminated by Spider in accordance with the provisions of such employment or consultant contract following the completion of the Amalgamation; and

	(iii)	is not (a) a party to any collective bargaining agreement, (b) to the knowledge of Spider, subject to any application for certification or threatened or apparent union-organizing campaigns for employees not covered under a collective bargaining agreement, or (c) subject to any current, or to the knowledge of Spider, pending or threatened strike or lockout.

(i)	Financial Matters. The audited annual financial statements of Spider for the financial years ended December 31, 2009 and 2008, the unaudited financial statements of Spider for the three months ended March 31, 2010 and the respective notes thereto (the “Spider Financial Statements”) were prepared in accordance with Canadian GAAP consistently applied, and fairly present in all material respects the financial condition of Spider at the respective dates indicated and the results of operations of Spider for the periods covered. Except as disclosed in the Spider Public Documents, as of the date hereof, Spider does not have any liability or obligation (including, without limitation, liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, or any related party transactions or off-balance sheet transactions not reflected in the Spider Financial Statements, except liabilities and obligations incurred in the ordinary and regular course of business (including the business of operating, developing, constructing and exploring Spider’s projects) since March 31, 2010, which liabilities or obligations would not reasonably be expected to have a Material Adverse Effect on Spider.

(j)	Books and Records. The corporate records and minute books of Spider have been maintained in accordance with all applicable Laws and are complete and accurate in all material respects, except where such incompleteness or inaccuracy would not have a Material Adverse Effect on Spider. Financial books and records and accounts of Spider in all material respects (i) have been maintained in accordance with good business practices on a basis consistent with prior years and past practice, (ii) are stated in reasonable detail and accurately and fairly reflect the transactions and acquisitions and dispositions of assets of Spider, and (iii) accurately and fairly reflect the basis for the financial statements of Spider.

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	(k)	Litigation. There is no claim, action, proceeding or investigation pending or in progress or, to the knowledge of Spider, threatened against or relating to Spider or affecting any of its properties or assets before any Governmental Entity which individually or in the aggregate has, or could reasonably be expected to have, a Material Adverse Effect on Spider and Spider is not aware of any existing ground on which any such claim, action, proceeding or investigation might be commenced with any reasonable likelihood of success. There is no bankruptcy, liquidation, winding-up or other similar proceeding pending or in progress, or, to the knowledge of Spider, threatened against or relating to Spider before any Governmental Entity. Neither Spider nor any of its properties or assets is subject to any outstanding judgment, order, writ, injunction or decree that involves or may involve, or restricts or may restrict the right or ability of Spider to conduct its business in all material respects as it has been carried on prior to the date hereof, or that would materially impede the consummation of the transactions contemplated by this Agreement, except to the extent any such matter would not have a Material Adverse Effect on Spider.

	(l)	Title to Properties and Operational Matters. Spider is the legal and beneficial owner of and has good and marketable title to the mining claims, concessions, licenses, leases or other instruments conferring mineral rights in respect of the properties in which Spider has an interest referred to in the Spider Public Documents (collectively, for the purposes of this Section 3.1(l), the “Spider properties and assets”). All agreements by which Spider holds an interest in the Spider properties and assets are in good standing according to their respective terms and the Spider properties and assets are in good standing under applicable Laws and all filings and work commitments required to maintain the Spider properties and assets in good standing have been properly recorded and filed in a timely manner with the appropriate Governmental Entity and there are no Encumbrances or any other interests in or on such Spider properties and assets except as disclosed in the Spider Public Documents. Spider has conducted and is conducting its business in material compliance with all applicable Laws, including all applicable Laws and all Governmental Entity authorizations and instructions, whether in writing or oral, relating to the Spider properties and assets. Spider has not received any notice of the revocation or cancellation of, or any intention to revoke or cancel, any of the mining claims, concessions, licenses, leases or other instruments conferring mineral rights in respect of the Spider properties and assets that would, individually or in the aggregate, result in a Material Adverse Effect on Spider. Without limiting the generality of the foregoing, Spider has obtained all export and import licences and permits necessary for the operation of the business of Spider, has not taken any action which would impair the ability of Spider to obtain necessary licences or permits in the future for the continued operation of such business, in accordance with applicable Laws and requirements of all Governmental Entities.

	(m)	Insurance. Spider maintains policies of insurance in amounts and in respect of such risks as are normal and usual for companies of a similar size engaged in the

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	exploration, development, mining and production of precious and base metals, and such policies are in full force and effect as of the date hereof.

(n)	Tax Matters. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to Spider:

	(i)	Spider has duly and timely made or prepared all Tax Returns required to be made or prepared by it, has duly and timely filed all Tax Returns required to be filed by it with the appropriate Governmental Entity and has, in all material respects, completely and correctly reported all income and all other amounts or information required to be reported thereon;

	(ii)	Spider has (A) duly and timely paid all Taxes due and payable by it, (B) duly and timely withheld all Taxes and other amounts required by applicable Laws to be withheld by it and has duly and timely remitted to the appropriate Governmental Entity such Taxes and other amounts required by applicable Laws to be remitted by it, and (C) duly and timely collected all amounts on account of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by applicable Laws to be collected by it and has duly and timely remitted to the appropriate Governmental Entity any such amounts required by applicable Laws to be remitted by it;

	(iii)	the charges, accruals and reserves for Taxes reflected on the Spider Financial Statements (whether or not due and whether or not shown on any Tax Return but excluding any provision for deferred income taxes) are, in the opinion of Spider, adequate under Canadian GAAP to cover Taxes with respect to Spider accruing through the date hereof;

	(iv)	there are no proceedings, investigations, audits, assessments, reassessments or claims now pending or to the knowledge of Spider, threatened against Spider that propose to assess Taxes in addition to those reported in the Tax Returns;

	(v)	no waiver of any statutory limitation period with respect to Taxes has been given or requested with respect to Spider; and

	(vi)	Spider is not in breach of its obligations under any agreement that it has entered into regarding the issue by Spider of “flow-through shares” within the meaning of the Tax Act.

(o)	Pension and Employee Benefits. Spider has complied, in all material respects, with all of the terms of the pension and other employee compensation and benefit obligations of Spider, including the provisions of any collective agreements, funding and investment contracts or obligations applicable thereto, arising under or relating to each of the pension or retirement income plans or other employee compensation or benefit plans, agreements, policies, programs, arrangements or practices, whether written or oral, which are maintained by or binding upon

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		Spider, other than such non-compliance that would not reasonably be expected to have a Material Adverse Effect on Spider.

	(p)	Reporting Status. Spider is a reporting issuer or its equivalent in the provinces of British Columbia, Alberta, Ontario and Quebec. The Spider Common Shares are listed on the TSXV.

	(q)	Reports. To the knowledge of Spider, since January 1, 2007, Spider has filed with the Securities Authorities, the TSXV and all applicable self-regulatory authorities a true and complete copy of all forms, reports, schedules, statements, certifications, material change reports and other documents required to be filed by it, including the Spider Public Documents. The Spider Public Documents, at the time filed or, if amended, as of the date of such amendment (a) did not contain any misrepresentation (as defined in the Securities Act (Ontario)) and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (b) complied in all material respects with the requirements of applicable securities Laws and the rules, policies and instruments of all Securities Authorities having jurisdiction over Spider except where such non-compliance has not had or would not reasonably be expected to have a Material Adverse Effect on Spider. Spider has not filed any confidential material change or other report or other document with any Securities Authorities or stock exchange or other self-regulatory authority which at the date hereof remains confidential.

	(r)	Compliance with Laws. Except as disclosed in this Agreement, Spider has complied with and is not in violation of any applicable Laws other than such non-compliance or violations that would not, individually or in the aggregate, have a Material Adverse Effect on Spider.

	(s)	No Cease Trade. Spider is not subject to any cease trade or other order of any applicable stock exchange or Securities Authority and, to the knowledge of Spider, no investigation or other proceedings involving Spider that may operate to prevent or restrict trading of any securities of Spider are currently in progress or pending before any applicable stock exchange or Securities Authority.

	(t)	No Option on Assets. No Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from Spider any of the material assets of Spider, to require Spider to issue any of its securities (other than pursuant to the Spider Agreements), or to acquire any of its outstanding shares, other than pursuant to agreements to which KWG is also a party.

	(u)	Certain Contracts. Spider is not a party to or bound by any non-competition agreement or any other agreement, obligation, judgment, injunction, order or decree that purports to (i) limit the manner or the localities in which all or any material portion of the business of Spider is conducted, (ii) limit any business

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		practice of Spider in any material respect, or (iii) restrict any acquisition or disposition of any property by Spider in any material respect, other than pursuant to agreements to which KWG is also a party.

	(v)	No Broker’s Commission. Spider has not entered into any agreement that would entitle any Person to any valid claim against Spider for a broker’s commission, finder’s fee or any like payment in respect of the Amalgamation or any other matter contemplated by this Agreement, other than pursuant to its financial advisory services agreement with IBK Capital Corp. and its engagement letter with TD Securities Inc.

	(w)	Vote Required. The only votes of the holders of any class or series of securities of Spider necessary to approve this Agreement and the Amalgamation and the transactions contemplated hereby or thereby is the Spider Shareholder Approval.

	(x)	U.S. Securities Law Matters. Spider: (i) is a “foreign private issuer” as defined in Rule 405 under the 1933 Act, (ii) has no class of securities outstanding that is or is required to be registered under section 12 of the 1934 Act or that is subject to the reporting requirements of section 13 or 15(d) of the 1934 Act, and (iii) is not registered or required to register as an investment company under the 1940 Act. No more than 10% of the Spider Common Shares (as calculated at the relevant date pursuant to Rule 800(h) under the 1933 Act) were held by U.S. Holders.

	(y)	No Shareholdings in KWG. Spider does not, legally or beneficially, own, directly or indirectly, any securities of KWG and does not have any right, agreement or obligation to purchase any securities of KWG or any securities or obligations of any kind convertible into or exchangeable for any securities of KWG.

3.2	Spider Shareholder Rights Plan

Spider represents, warrants and covenants as follows:

	(a)	neither a Flip-in Event nor a Separation Time which could lead to the implementation of the dilutive features of the Spider Shareholder Rights Plan has occurred as at the date hereof;

	(b)	the Amalgamation is an Exempt Acquisition for purposes of the Spider Shareholder Rights Plan and accordingly, the Amalgamation shall not trigger a Flip-in Event nor a Separation Time which could lead to the implementation of the dilutive features of the Spider Shareholder Rights Plan;

	(c)	Spider, the Spider Board and the special committee of the Spider Board shall each use its commercially reasonable efforts to defend any application to a court or a securities regulatory authority having jurisdiction to cease-trade the Spider Shareholder Rights Plan until the earlier of (i) the date that is 15 days after the date on which the Spider Shareholders have resolved to not approve the Amalgamation at the Spider Meeting, and (ii) the date on which KWG advises

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		Spider in writing that it has determined to not make a Take-over Bid for Spider Common Shares; and

	(d)	the Spider Board has, as at the date hereof, deferred the Separation Time until such date as shall be determined by the Spider Board, as contemplated by the definition of “Separation Time” set forth in section 1.1(tt) of the Spider Shareholder Rights Plan.

	For purposes of this Section 3.2, the terms “Flip-in Event”, “Separation Time”, “Exempt Acquisition” and “Take-over Bid” shall have the meanings ascribed to such terms in the Spider Shareholder Rights Plan.

	Section 3.2(c) shall survive the termination of this Agreement.

3.3	Representations and Warranties of KWG

KWG hereby represents and warrants to Spider, and hereby acknowledges that Spider is relying upon such representations and warranties in connection with entering into this Agreement and agreeing to complete the Amalgamation, as follows:

	(a)	Organization. Each of KWG and the KWG Subsidiaries has been incorporated, is subsisting and has full corporate and legal power and authority to own its property and assets and to conduct its business as currently owned and conducted. Each of KWG and the KWG Subsidiaries is registered, licensed or otherwise qualified as an extra-provincial corporation or a foreign corporation in each jurisdiction where the nature of the business or the location or character of the property and assets owned or leased by it requires it to be so registered, licensed or otherwise qualified, other than those jurisdictions where the failure to be so registered, licensed or otherwise qualified would not have a Material Adverse Effect on KWG. All of the outstanding shares of the KWG Subsidiaries are validly issued, and are fully paid and non-assessable to the extent such a concept exists under applicable Laws. Except as disclosed by KWG, all of the outstanding shares of the KWG Subsidiaries are owned directly or indirectly by KWG. Except pursuant to restrictions on transfer contained in the articles or by-laws (or their equivalent) of the applicable KWG Subsidiary, the outstanding shares of each of the KWG Subsidiaries are owned free and clear of all Encumbrances and KWG is not liable to any creditor in respect thereof. There are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any issued or unissued securities of, or interest in, any of the KWG Subsidiaries from either KWG or any of the KWG Subsidiaries, other than warrants to purchase up to an aggregate of 10,520,000 common shares of Debuts (which warrants will be cancelled in connection with, and prior to the completion of, the Spinoff).

	(b)	Capitalization. KWG is authorized to issue an unlimited number of KWG Common Shares. As of the close of business on June 9, 2010, there were outstanding:

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	(i)	589,499,206 KWG Common Shares (and associated rights under the KWG Shareholder Rights Plan);

	(ii)	KWG Options to acquire an aggregate of up to 55,856,780 KWG Common Shares; and

	(iii)	KWG Warrants to acquire an aggregate of up to 184,537,494 KWG Common Shares.

	Except for (X) the KWG Options, (Y) the KWG Warrants and (Z) the securities issuable pursuant to the KWG Shareholder Rights Plan, and except pursuant to this Agreement and the transactions contemplated hereby, as of the date hereof, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating KWG or any of the KWG Subsidiaries to issue or sell any shares of KWG or any securities or obligations of any kind convertible into or exchangeable for any shares of KWG. All outstanding KWG Common Shares have been authorized and are validly issued and outstanding as fully paid and non-assessable shares, free of pre-emptive rights. As of the date hereof, there are no outstanding bonds, debentures or other evidences of indebtedness of KWG or any of the KWG Subsidiaries having the right to vote with the KWG Shareholders on any matter. There are no outstanding contractual obligations of KWG or of any of the KWG Subsidiaries to repurchase, redeem or otherwise acquire any outstanding KWG Common Shares or with respect to the voting or disposition of any outstanding KWG Common Shares.

(c)	Authority. KWG has all necessary corporate power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by KWG as contemplated by this Agreement, and to perform its obligations hereunder and under such other agreements and instruments. The execution and delivery of this Agreement by KWG and the completion by KWG of the transactions contemplated by this Agreement have been authorized by the KWG Board and no other corporate proceedings on the part of KWG (including approval by KWG Shareholders) are necessary to authorize this Agreement or the completion by KWG of the transactions contemplated hereby. This Agreement has been executed and delivered by KWG and constitutes a legal, valid and binding obligation of KWG, enforceable against KWG in accordance with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other applicable Laws relating to or affecting creditors’ rights generally, and to general principles of equity. The execution and delivery by KWG of this Agreement and the performance by it of its obligations hereunder and the completion of the transactions contemplated hereby, do not and will not:

	(i)	result in a violation, contravention or breach or constitute a default under, or entitle any party to terminate, accelerate, modify or call any obligations or rights under, require any consent to be obtained under or give rise to any termination rights under any provision of:

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	(A)	articles or by-laws of KWG or the constating documents of any of the KWG Subsidiaries,

	(B)	any applicable Law or rule or policy of the TSXV (except that the approval of the TSXV, which is required for the completion by KWG of the transactions contemplated hereby, has been applied for by KWG but not obtained as of the date hereof), or

	(C)	any credit arrangement, note, bond, mortgage, indenture, deed of trust, lease, franchise, concession, easement, contract, agreement, licence, permit or other instrument to which KWG or any of the KWG Subsidiaries are bound or are subject to or of which KWG or any of the KWG Subsidiaries is the beneficiary;

in each case, which would, individually or in the aggregate, have a Material Adverse Effect on KWG;

(ii)	cause any indebtedness owing by KWG or any of the KWG Subsidiaries to come due before its stated maturity or cause any available credit to cease to be available which would, individually or in the aggregate, have a Material Adverse Effect on KWG;

(iii)	result in the imposition of any Encumbrance upon any of the property or assets of KWG or any of the KWG Subsidiaries or give any Person the right to acquire any of KWG’s assets, or restrict, hinder, impair or limit the ability of KWG or any of the KWG Subsidiaries to conduct the business of KWG or any of the KWG Subsidiaries as and where it is now being conducted which would, individually or in the aggregate, have a Material Adverse Effect on KWG; or

(iv)	result in or accelerate the time for payment (or vesting of, or increase the amount of any severance, unemployment compensation, “golden parachute”, bonus, termination payments, retention bonus or otherwise) becoming due to any director or officer of KWG or any KWG Subsidiary or increase any benefits otherwise payable under any pension or benefits plan of KWG or any KWG Subsidiary or result in the acceleration of the time of payment or vesting of any such benefits.

No consent, approval, order or authorization of, or declaration or filing with, any Governmental Entity or other Person is required to be obtained by KWG or any of the KWG Subsidiaries in connection with the execution and delivery of this Agreement or the consummation by KWG of the transactions contemplated hereby other than (i) filings required under the CBCA and the Companies Act (Quebec), (ii) filings with and approvals required by the Securities Authorities and stock exchanges (including the approval referred to in Section 3.3(c)(i)(B)), and (iii) any other consents, approvals, orders, authorizations, declarations or

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	filings which, if not obtained, would not, individually or in the aggregate, have a Material Adverse Effect on KWG.

(d)	Directors’ Approvals. The KWG Board has:

	(i)	determined that the Amalgamation is in the best interests of KWG; and

	(ii)	authorized the entering into of this Agreement, and the performance of KWG’s obligations hereunder.

(e)	KWG Subsidiaries. The only Subsidiaries of KWG are the KWG Subsidiaries and KWG does not own a direct or indirect voting or equity interest in any Person that is not a KWG Subsidiary, other than 250,000 Spider Common Shares, 353,488 common shares of Copper Mesa Mining Corporation and 3,452,217 common shares of Strike Minerals Inc.

(f)	No Defaults. To the knowledge of KWG, none of KWG or any of the KWG Subsidiaries is in default under, and, there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute a default by KWG or any of the KWG Subsidiaries, under any contract, agreement or licence that is material to the conduct of the business of KWG or any of the KWG Subsidiaries to which any of them is a party or by which any of them is bound that would, individually or in the aggregate, have a Material Adverse Effect on KWG.

(g)	Absence of Changes. Except as disclosed in the KWG Public Documents, since March 31, 2010:

	(i)	KWG and each of the KWG Subsidiaries has conducted its business only in the ordinary and regular course of business consistent with past practice;

	(ii)	none of KWG or any of the KWG Subsidiaries has incurred or suffered a Material Adverse Change;

	(iii)	there has not been any acquisition or sale by KWG or any of the KWG Subsidiaries of any material property or assets thereof;

	(iv)	other than in the ordinary and regular course of business consistent with past practice, there has not been any incurrence, assumption or guarantee by KWG or any of the KWG Subsidiaries of any debt for borrowed money, any creation or assumption by KWG or any of the KWG Subsidiaries of any Encumbrance, any making by KWG or any of the KWG Subsidiaries of any loan, advance or capital contribution to or investment in any other Person (other than loans made to other KWG Subsidiaries which will be converted into shares thereof prior to the completion of the Spinoff) or any entering into, amendment of, relinquishment, termination or non-renewal by KWG or any of the KWG

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		Subsidiaries, of any contract, agreement, licence, lease transaction, commitment or other right or obligation that would, individually or in the aggregate, have a Material Adverse Effect on KWG;

	(v)	KWG has not declared or paid any dividends or made any other distribution in respect of any of the KWG Common Shares;

	(vi)	KWG has not effected or passed any resolution to approve a split, consolidation or reclassification of any outstanding KWG Common Shares;

	(vii)	other than in the ordinary and regular course of business consistent with past practice, there has not been any material increase in or modification of the compensation payable by KWG or any of the KWG Subsidiaries to any of their respective directors, officers, employees or consultants or any grant to any such director, officer, employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement (including, without limitation, the granting of KWG Options pursuant to the KWG Stock Option Plan) made to, for or with any of such directors, officers, employees or consultants;

	(viii)	KWG has not effected any material change in its accounting methods, principles or practices, other than as disclosed in the KWG Financial Statements; and

	(ix)	KWG has not adopted any, or materially amended any, collective bargaining agreement, bonus, pension, profit sharing, stock purchase, stock option or other benefit plan.

(h)	Employment Agreements. None of KWG or any of the KWG Subsidiaries:

	(i)	is a party to any written or oral policy, agreement, obligation or understanding providing for retention bonuses, severance or termination payments to, or any employment or consulting agreement with any director or officer of KWG or any of the KWG Subsidiaries that would be triggered by KWG’s entering into this Agreement or the completion of the Amalgamation;

	(ii)	has any employee or consultant whose employment or contract with KWG or the KWG Subsidiary cannot be terminated by KWG or any KWG Subsidiary in accordance with the provisions of such employment or consultant contract following the completion of the Amalgamation; and

	(iii)	(a) is a party to any collective bargaining agreement, (b) is, to the knowledge of KWG, subject to any application for certification or threatened or apparent union-organizing campaigns for employees not covered under a collective bargaining agreement, or (c) is subject to any

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		current, or to the knowledge of KWG, pending or threatened strike or lockout.

(i)	Financial Matters. The audited annual financial statements of KWG for the financial years ended December 31, 2009 and 2008, the unaudited consolidated financial statements of KWG for the three months ended March 31, 2010 and the respective notes thereto (the “KWG Financial Statements”) were prepared in accordance with Canadian GAAP consistently applied, and fairly present in all material respects the consolidated financial condition of KWG at the respective dates indicated and the results of operations of KWG for the periods covered on a consolidated basis. Except as disclosed in the KWG Public Documents, as of the date hereof, neither KWG nor any of the KWG Subsidiaries has any liability or obligation (including, without limitation, liabilities or obligations to fund any operations or work or exploration program to give any guarantees or for Taxes), whether accrued, absolute, contingent or otherwise, or any related party transactions or off-balance sheet transactions not reflected in the KWG Financial Statements, except liabilities and obligations incurred in the ordinary and regular course of business (including the business of operating, developing, constructing and exploring KWG’s projects) since March 31, 2010, which liabilities or obligations would not reasonably be expected to have a Material Adverse Effect on KWG.

(j)	Books and Records. The corporate records and minute books of KWG and the KWG Subsidiaries have been maintained in accordance with all applicable Laws and are complete and accurate in all material respects, except where such incompleteness or inaccuracy would not have a Material Adverse Effect on KWG. Financial books and records and accounts of KWG and the KWG Subsidiaries, in all material respects (i) have been maintained in accordance with good business practices on a basis consistent with prior years and past practice, (ii) are stated in reasonable detail and accurately and fairly reflect the transactions and acquisitions and dispositions of assets of KWG and the KWG Subsidiaries, and (iii) accurately and fairly reflect the basis for the consolidated financial statements of KWG.

(k)	Litigation. There is no claim, action, proceeding or investigation pending or in progress or, to the knowledge of KWG, threatened against or relating to KWG, any of the KWG Subsidiaries or affecting any of their respective properties or assets before any Governmental Entity which individually or in the aggregate has, or could reasonably be expected to have, a Material Adverse Effect on KWG, and KWG is not aware of any existing ground on which any such claim, action, proceeding or investigation might be commenced with any reasonable likelihood of success. There is no bankruptcy, liquidation, winding-up or other similar proceeding pending or in progress, or, to the knowledge of KWG, threatened against or relating to KWG or any of the KWG Subsidiaries before any Governmental Entity. None of KWG or any of the KWG Subsidiaries nor any of their respective properties or assets is subject to any outstanding judgment, order, writ, injunction or decree that involves or may involve, or restricts or may restrict the right or ability of KWG or the KWG Subsidiary, as the case may be, to

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	conduct its business in all material respects as it has been carried on prior to the date hereof, or that would materially impede the consummation of the transactions contemplated by this Agreement, except to the extent any such matter would not have a Material Adverse Effect on KWG.

(l)	Title to Properties and Operational Matters. KWG or one of the KWG Subsidiaries is the legal and beneficial owner of and has good and marketable title to the mining claims, concessions, licenses, leases or other instruments conferring mineral rights in respect of the properties in which KWG and any of the KWG Subsidiaries has an interest referred to in the KWG Public Documents (collectively, for the purposes of this Section 3.3(l), the “KWG properties and assets”). All agreements by which each of KWG or any of the KWG Subsidiaries holds an interest in the KWG properties and assets are in good standing according to their respective terms and the KWG properties and assets are in good standing under applicable Laws and all filings and work commitments required to maintain the KWG properties and assets in good standing have been properly recorded and filed in a timely manner with the appropriate Governmental Entity and there are no Encumbrances or any other interests in or on such KWG properties and assets except as disclosed in the KWG Public Documents. Each of KWG and each of the KWG Subsidiaries has conducted and is conducting its business in material compliance with all applicable Laws, including all applicable Laws and all Governmental Entity authorizations and instructions, whether in writing or oral, relating to the KWG properties and assets. KWG has not, nor has any of the KWG Subsidiaries, received any notice of the revocation or cancellation of, or any intention to revoke or cancel, any of the mining claims, concessions, licenses, leases or other instruments conferring mineral rights in respect of the KWG properties and assets that would, individually or in the aggregate, result in a Material Adverse Effect on KWG. Without limiting the generality of the foregoing, KWG and the KWG Subsidiaries have obtained all export and import licences and permits necessary for the operation of the business of KWG and the KWG Subsidiaries, respectively, have not taken any action which would impair the ability of KWG or the KWG Subsidiaries to obtain necessary licences or permits in the future for the continued operation of such business, in accordance with applicable Laws and requirements of all Governmental Entities.

(m)	Insurance. KWG maintains policies of insurance in amounts and in respect of such risks as are normal and usual for companies of a similar size engaged in the exploration, development, mining and production of precious and base metals, and such policies are in full force and effect as of the date hereof.

(n)	Tax Matters. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to KWG:

	(i)	each of KWG and the KWG Subsidiaries has duly and timely made or prepared all Tax Returns required to be made or prepared by it, has duly and timely filed all Tax Returns required to be filed by it with the appropriate Governmental Entity and has, in all material respects,

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		completely and correctly reported all income and all other amounts or information required to be reported thereon;

	(ii)	each of KWG and the KWG Subsidiaries has (A) duly and timely paid all Taxes due and payable by it, (B) duly and timely withheld all Taxes and other amounts required by applicable Laws to be withheld by it and has duly and timely remitted to the appropriate Governmental Entity such Taxes and other amounts required by applicable Laws to be remitted by it, and (C) duly and timely collected all amounts on account of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by applicable Laws to be collected by it and has duly and timely remitted to the appropriate Governmental Entity any such amounts required by applicable Laws to be remitted by it;

	(iii)	the charges, accruals and reserves for Taxes reflected on the KWG Financial Statements (whether or not due and whether or not shown on any Tax Return but excluding any provision for deferred income taxes) are, in the opinion of KWG, adequate under Canadian GAAP to cover Taxes with respect to KWG and the KWG Subsidiaries accruing through the date hereof;

	(iv)	there are no proceedings, investigations, audits, assessments, reassessments or claims now pending or to the knowledge of KWG, threatened against any of KWG or the KWG Subsidiaries that propose to assess Taxes in addition to those reported in the Tax Returns;

	(v)	no waiver of any statutory limitation period with respect to Taxes has been given or requested with respect to KWG or any of the KWG Subsidiaries; and

	(vi)	KWG is not in breach of its obligations under any agreement that it has entered into regarding the issue by KWG of “flow-through shares” within the meaning of the Tax Act.

(o)	Pension and Employee Benefits. KWG and the KWG Subsidiaries have complied, in all material respects, with all of the terms of the pension and other employee compensation and benefit obligations of KWG and the KWG Subsidiaries, as the case may be, including the provisions of any collective agreements, funding and investment contracts or obligations applicable thereto, arising under or relating to each of the pension or retirement income plans or other employee compensation or benefit plans, agreements, policies, programs, arrangements or practices, whether written or oral, which are maintained by or binding upon KWG or the KWG Subsidiaries, as the case may be, other than such non-compliance that would not reasonably be expected to have a Material Adverse Effect on KWG.

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	(p)	Reporting Status. KWG is a reporting issuer or its equivalent in the provinces of British Columbia, Alberta, Manitoba, Ontario, Quebec and Nova Scotia. The KWG Common Shares are listed on the TSXV.

	(q)	Reports. To the knowledge of KWG, since January 1, 2007, KWG has filed with the Securities Authorities, the TSXV and all applicable self-regulatory authorities a true and complete copy of all forms, reports, schedules, statements, certifications, material change reports and other documents required to be filed by it, including the KWG Public Documents. The KWG Public Documents, at the time filed or, if amended, as of the date of such amendment (a) did not contain any misrepresentation (as defined in the Securities Act (Ontario)) and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (b) complied in all material respects with the requirements of applicable securities Laws and the rules, policies and instruments of all Securities Authorities having jurisdiction over KWG except where such non-compliance has not had or would not reasonably be expected to have a Material Adverse Effect on KWG. KWG has not filed any confidential material change or other report or other document with any Securities Authorities or stock exchange or other self-regulatory authority which at the date hereof remains confidential.

	(r)	Compliance with Laws. Except as disclosed in this Agreement, KWG and the KWG Subsidiaries have complied with and are not in violation of any applicable Laws other than such non-compliance or violations that would not, individually or in the aggregate, have a Material Adverse Effect on KWG.

	(s)	No Cease Trade. KWG is not subject to any cease trade or other order of any applicable stock exchange or Securities Authority and, to the knowledge of KWG, no investigation or other proceedings involving KWG that may operate to prevent or restrict trading of any securities of KWG are currently in progress or pending before any applicable stock exchange or Securities Authority.

	(t)	No Option on Assets. No Person has any agreement or option or any right or privilege capable of becoming an agreement or option for the purchase from KWG or the KWG Subsidiaries of any of the material assets of KWG or any of the KWG Subsidiaries to require KWG or any of the KWG Subsidiaries to issue any of its securities, or to acquire any of its outstanding securities, other than pursuant to agreements to which Spider is also a party (including pursuant to the exercise of outstanding warrants held by KWG to purchase up to 10,520,000 common shares of Debuts, which warrants will be cancelled in connection with, and prior to the completion of, the Spinoff).

	(u)	Certain Contracts. None of KWG or any of the KWG Subsidiaries is a party to or bound by any non-competition agreement or any other agreement, obligation, judgment, injunction, order or decree that purports to (i) limit the manner or the localities in which all or any material portion of the business of KWG or the

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		KWG Subsidiaries are conducted, (ii) limit any business practice of KWG or any KWG Subsidiary in any material respect, or (iii) restrict any acquisition or disposition of any property by KWG or any KWG Subsidiary in any material respect, other than pursuant to agreements to which Spider is also a party.

	(v)	No Broker’s Commission. KWG has not entered into any agreement that would entitle any Person to any valid claim against KWG for a broker’s commission, finder’s fee or any like payment in respect of the Amalgamation or any other matter contemplated by this Agreement, other than pursuant to its financial advisory services agreement with Canaccord Genuity Corp. or another financial services agreement which may be entered into with a financial advisor engaged by KWG in connection with the Amalgamation.

	(w)	Shares. The KWG Common Shares to be issued:

		(i)	pursuant to the Amalgamation will, upon issue, and

		(ii)	upon exercise of New KWG Options, Spider Options (which have not been exchanged for New KWG Options and which have not expired), Spider Warrants, Spider Unit Compensation Options and Spider Unit Warrants outstanding immediately following completion of the Amalgamation, will, upon issue in accordance with their respective terms and conditions and this Agreement,

		be issued as fully paid and non-assessable shares and, subject to the approval of the TSXV, listed for trading on the TSXV.

	(x)	U.S. Securities Law Matters. KWG: (i) is a “foreign private issuer” as defined in Rule 405 under the 1933 Act, (ii) has no class of securities outstanding that is or is required to be registered under section 12 of the 1934 Act or that is subject to the reporting requirements of section 13 or 15(d) of the 1934 Act, and (iii) is not registered or required to register as an investment company under the 1940 Act.

	(y)	No Shareholdings in Spider. Other than 250,000 Spider Common Shares which are beneficially owned by KWG, KWG does not, legally or beneficially, own, directly or indirectly, any securities of Spider and does not have any right, agreement or obligation to purchase any securities of Spider or any securities or obligations of any kind convertible into or exchangeable for any securities of Spider.

3.4	KWG Shareholder Rights Plan

KWG represents, warrants and covenants as follows:

	(a)	neither a Flip-in Event nor a Separation Time which could lead to the implementation of the dilutive features of the KWG Shareholder Rights Plan has occurred as at the date hereof;

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	(b)	KWG, the KWG Board and the special committee of the KWG Board shall each use its commercially reasonable efforts to defend any application to a court or a securities regulatory authority having jurisdiction to cease-trade the KWG Shareholder Rights Plan until the earlier of (i) the date that is 15 days after the date on which the Spider Shareholders have resolved to not approve the Amalgamation at the Spider Meeting, and (ii) the date on which Spider advises KWG in writing that it has determined to not make a Take-over Bid for KWG Common Shares; and

	(c)	the KWG Board has, as at the date hereof, deferred the Separation Time until such date as shall be determined by the KWG Board, as contemplated by the definition of “Separation Time” set forth in section 1.1 of the KWG Shareholder Rights Plan.

	For purposes of this Section 3.4, the terms “Flip-in Event”, “Separation Time” and “Take-over Bid” shall have the meanings ascribed to such terms in the KWG Shareholder Rights Plan.

	Section 3.4(b) shall survive the termination of this Agreement.

3.5	Survival of Representations and Warranties

The representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement and shall expire and be terminated and extinguished upon completion of the Amalgamation.

ARTICLE 4

COVENANTS

4.1	Covenants of Spider

Subject to Sections 6.1 and 6.2, Spider hereby covenants and agrees with KWG as follows:

	(a)	Spider Meeting. In a timely and expeditious manner, Spider shall:

		(i)	prepare, with the assistance of KWG, and file the Proxy Circular (which shall be in a form satisfactory to KWG, acting reasonably), together with any other documents required by applicable Laws, in all jurisdictions where the Proxy Circular is required to be filed and mail the Proxy Circular in accordance with all applicable Laws, to Spider Shareholders to whom the Proxy Circular is required to be mailed, complying in all material respects with all applicable Laws on the date of the mailing thereof and in the form and containing the information required by all applicable Laws, including all applicable corporate and securities Laws and requirements, and not containing any misrepresentation (as defined under applicable securities Laws and requirements) with respect thereto,

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		other than with respect to any information relating to and provided by KWG;

	(ii)	subject to the terms of this Agreement, the Spider Board shall: (A) recommend to all Spider Shareholders that they vote in favour of the Amalgamation and the Spider Resolution and the other transactions contemplated hereby or thereby and that they reject, and not tender their Spider Common Shares to, the Cliffs Spider Bid; and (B) not withdraw, modify, qualify, or publicly propose to or publicly state that it intends to withdraw, modify or qualify, its recommendation as set forth in clause (A) in any manner materially adverse to KWG (a “Change of Spider Recommendation”), it being understood that failing to affirm the approval or recommendation of the Spider Board of the transactions contemplated herein after a Spider Alternative Proposal has been publicly announced shall be considered a Change of Spider Recommendation except as expressly permitted by Section 6.1(a)(iii);

	(iii)	hold the Spider Meeting by no later than July 14, 2010;

	(iv)	provide notice to KWG of the Spider Meeting and allow representatives of KWG to attend the Spider Meeting;

	(v)	provide KWG with information on the proxies received and the securityholder votes on the Spider Resolution on a daily basis commencing at least four (4) Business Days before the date of the Spider Meeting to the extent that such information is available to Spider;

	(vi)	conduct the Spider Meeting in accordance with the CBCA, the articles and by-laws of Spider and as otherwise required by applicable Laws; and

	(vii)	take all such actions as may be required under the CBCA in connection with the transactions contemplated by this Agreement.

(b)	Adjournment. Spider shall not adjourn the Spider Meeting (or propose to do so), unless quorum is not present at the Spider Meeting. Spider shall not otherwise adjourn, postpone or cancel the Spider Meeting unless:

	(i)	KWG consents in writing to such adjournment, postponement or cancellation of the Spider Meeting; or

	(ii)	a court or a securities regulatory authority having jurisdiction so orders such adjournment, postponement or cancellation of the Spider Meeting.

(c)	Dissent Rights. Spider shall provide KWG with a copy of any purported exercise of the Dissent Rights and written communications with such Spider Shareholder purportedly exercising such Dissent Rights, and shall not settle or compromise any action brought by any present, former or purported holder of any of its securities in connection with the transactions contemplated by this Agreement,

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	including the Amalgamation, without the prior consent of KWG, which consent shall not be unreasonably withheld or delayed.

(d)	Amendments. In a timely and expeditious manner, Spider shall prepare (in consultation with KWG) and file any amendments or supplements to the Proxy Circular that are mutually agreed upon by the Parties (or are otherwise required by applicable Laws) (which amendments or supplements shall be in a form satisfactory to KWG, acting reasonably) with respect to the Spider Meeting and mail such amendments or supplements in accordance with all applicable Laws, in and to all Spider Shareholders to whom such amendments or supplements are required to be mailed, complying in all material respects with all applicable Laws on the date of the mailing thereof.

(e)	U.S. Securities Law Matters. Spider shall disseminate the Proxy Circular, including any amendments thereto, to U.S. Holders of Spider Common Shares on a comparable basis to that provided to holders of the Spider Common Shares in Canada.

(f)	Copy of Documents. Spider shall furnish promptly to KWG a copy of any filings made under any applicable Laws and any dealings or communications with any Governmental Entity, Securities Authority or stock exchange in connection with, or in any way affecting, the transactions contemplated by this Agreement.

(g)	Usual Business. Other than in contemplation of or as required to give effect to the transactions contemplated by this Agreement, from the date hereof until the earlier of the Termination Date and the Effective Date, Spider shall conduct its business only, and shall not take any action except, in the ordinary and regular course of business consistent with its past practices.

	For the purposes of this Section 4.1(g), any payment outside of the ordinary course of business by Spider of an amount in excess of $150,000, which obligation did not exist at the date of this Agreement, or any obligation or agreement by Spider created after the date of this Agreement providing for payment by Spider of an amount in excess of $150,000 and not disclosed by Spider to KWG as of the date of this Agreement, shall in each case be deemed to not be in the ordinary course consistent with past practices of Spider, and shall require the prior written approval of KWG, which approval shall not be unreasonably withheld or delayed.

(h)	Certain Actions Prohibited. Other than in contemplation of or as required to give effect to the transactions contemplated by this Agreement or as otherwise permitted pursuant to this Agreement, Spider shall not, without the prior written consent of KWG, which consent shall not be unreasonably withheld or delayed, directly or indirectly do or permit to occur, any of the following:

	(i)	issue, sell, grant, pledge, lease, dispose of, encumber or create any Encumbrance on or agree to issue, sell, grant, pledge, lease, dispose of, or

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	encumber or create any Encumbrance on any shares of, or any options, warrants, calls, conversion privileges or rights of any kind to acquire any shares of Spider other than the issue of Spider Common Shares pursuant to:

	(A)	the valid exercise of the Spider Convertible Securities issued and outstanding on the date hereof in accordance with their terms as of the date hereof;

	(B)	the Proposed Spider Financing; and

	(C)	the Spider Agreements;

(ii)	other than pursuant to obligations or rights under existing contracts, agreements and commitments (to the extent such rights have been exercised or initiated by other Persons), sell, lease, encumber or otherwise dispose of any property or assets or enter into any agreement or commitment in respect of any of the foregoing except where to do so would not have a Material Adverse Effect;

(iii)	amend or propose to amend the articles or by-laws of Spider or any of the terms of the Spider Convertible Securities as they exist at the date of this Agreement;

(iv)	reduce its stated capital, or split, combine or reclassify any of the shares of Spider, or declare, set aside or pay any dividend or other distribution payable in cash, securities, property or otherwise with respect to the Spider Common Shares;

(v)	redeem, purchase or offer to purchase any Spider Common Shares and, other than pursuant to the Spider Stock Option Plan, any options or obligations or rights under existing contracts, agreements and commitments;

(vi)	adopt resolutions or enter into any agreement providing for the amalgamation, merger, consolidation, reorganization, liquidation, dissolution or any other extraordinary transaction in respect of itself, or adopt any plan of liquidation;

(vii)	acquire or agree to acquire any corporation, partnership, business corporation (or other entity or material interest therein) or division of any corporation or other entity, or make any investment;

(viii)	(A) satisfy or settle any claim or dispute, except such as have been included in the interim financial statements of Spider for the three months ended March 31, 2010 and which are, individually or in the aggregate, in an amount in excess of $150,000; (B) relinquish any contractual rights that are, individually or in the aggregate, in an amount in excess of $150,000;

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			or (c) enter into any interest rate, currency or commodity swaps, hedges, caps, collars, forward sales or other similar financial instruments;

		(ix)	acquire any material assets, incur any indebtedness for borrowed money or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for, the obligations of any other individual or entity, or make any loans or advances, authorize, recommend or propose any release or relinquishment of any material contractual right, waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document, enter into or terminate any hedges, swaps or other similar financial instruments or transactions, enter into any agreements with its directors or officers or their respective affiliates, or authorize, propose, permit or agree to any of the above;

		(x)	enter into new commitments of a capital expenditure nature or incur any new contingent liabilities other than (A) ordinary course expenditures, (B) expenditures required by applicable Laws, (C) expenditures made in connection with transactions contemplated in this Agreement, and (D) capital expenditures required to prevent the occurrence of a Material Adverse Effect;

		(xi)	create any new obligations or liabilities or modify or in any manner amend any existing obligations and liabilities to pay any amount, including loan amounts, to its officers, directors, employees and consultants, other than for salary, bonuses under its existing bonus arrangements and directors’ fees in the ordinary course, in each case in amounts consistent with historic practices and obligations or liabilities or arising in the ordinary and regular course of business;

		(xii)	adopt or amend or make any contribution to any bonus, profit sharing, option, deferred compensation, insurance, incentive compensation, other compensation or other similar plan, agreement, trust, fund or arrangements for the benefit of employees, except as is necessary to comply with applicable Laws or with respect to existing provisions of any such plans, programs, arrangements or agreements;

		(xiii)	take actions that could reasonably be expected to be prejudicial to KWG’s interest in the business, property or assets of Spider following the closing of the Amalgamation; or

		(xiv)	except as required by Canadian GAAP or any applicable Laws, make any changes to the existing accounting practices of Spider or make any material tax election inconsistent with past practice.

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(i)	Employment Agreements. Except where the prior intention to do so has been disclosed by Spider, Spider shall not, without the prior written consent of KWG, enter into or modify any employment, consulting, severance, collective bargaining or similar agreement, policy or arrangement with, or grant any bonus, salary increase, option to purchase shares, pension or supplemental pension benefit, profit sharing, retirement allowance, deferred compensation, incentive compensation, severance, change of control or termination pay to, or make any loan to, any officer, director, employee or consultant of Spider.

(j)	Insurance. Spider shall use its commercially reasonable efforts to cause its current insurance (or reinsurance) policies not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and re-insurance companies of internationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect.

(k)	Certain Actions. Spider shall:

	(i)	not take any action, or refrain from taking any action (subject to commercially reasonable efforts), or permit any action to be taken or not taken, inconsistent with the provisions of this Agreement or which would reasonably be expected to materially impede the completion of the transactions contemplated hereby or would render, or that could reasonably be expected to render, any representation or warranty made by Spider in this Agreement untrue or inaccurate in any material respect at any time on or before the Effective Date if then made, or which would or could have a Material Adverse Effect on Spider; and

	(ii)	promptly notify KWG of (A) any Material Adverse Change or Material Adverse Effect, or any change, event, occurrence or state of facts that could reasonably be expected to become a Material Adverse Change or to have a Material Adverse Effect, in respect of the business or in the conduct of the business of Spider, (B) any material Governmental Entity or third person complaints, investigations or hearings (or communications indicating that the same may be contemplated), (C) any breach by Spider of any covenant or agreement contained in this Agreement, and (D) any event occurring subsequent to the date hereof that would render any representation or warranty of Spider contained in this Agreement, if made on or as of the date of such event or the Effective Date, to be untrue or inaccurate in any material respect.

(l)	No Compromise. Spider shall not settle or compromise any claim brought by any present, former or purported holder of any securities of Spider in connection with the transactions contemplated by this Agreement on or before the Effective Date without the prior written consent of KWG.

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(m)	Contractual Obligations. Without the prior written agreement of KWG, Spider shall not enter into, renew or modify in any respect any material contract, agreement, lease, commitment or arrangement to which Spider is a party or by which it is bound, except insofar as may be necessary to permit or provide for the completion of the Amalgamation or where to do so would not have a Material Adverse Effect.

(n)	Satisfaction of Conditions. Spider shall use all commercially reasonable efforts to satisfy, or cause to be satisfied, all conditions precedent to its obligations to the extent that the same is within its control and to take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under all applicable Laws to complete the transactions contemplated by this Agreement, including using its commercially reasonable efforts to:

	(i)	obtain the Spider Shareholder Approval in accordance with the provisions of the CBCA and the requirements of any applicable regulatory authority;

	(ii)	obtain all other consents, approvals and authorizations as are required to be obtained by Spider under any applicable Laws or from any Governmental Entity or under the rules or policies of the TSXV that would, if not obtained, materially impede the completion of the transactions contemplated by this Agreement or have a Material Adverse Effect on Spider;

	(iii)	effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the transactions contemplated by this Agreement and participate and appear in any proceedings of any party hereto before any Governmental Entity;

	(iv)	oppose, lift or rescind any injunction or restraining order or other order or action challenging or affecting this Agreement, the transactions contemplated hereby or seeking to enjoin or delay, or otherwise adversely affecting the ability of the parties hereto to consummate, the transactions contemplated hereby, subject to the Spider Board determining in good faith after receiving advice from outside legal counsel (which may include written opinions or advice) that taking such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided that, immediately upon receipt of such advice, Spider advises KWG in writing that it has received such advice and provides written details thereof to KWG;

	(v)	fulfill all conditions and satisfy all provisions of this Agreement and the Amalgamation required to be fulfilled or satisfied by Spider; and

	(vi)	cooperate with KWG in connection with the performance by it of its obligations hereunder, provided however that the foregoing shall not be

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		construed to obligate Spider to pay or cause to be paid any monies to cause such performance to occur, other than as contemplated in this Agreement.

(o)	Keep Fully Informed. Subject to applicable Laws, Spider shall use commercially reasonable efforts to conduct itself so as to keep KWG fully informed as to the material decisions or actions required or required to be made with respect to the operation of its business.

(p)	Cooperation. Spider shall make, or cooperate as necessary in the making of, all necessary filings and applications under all applicable Laws required in connection with the transactions contemplated hereby and take all reasonable action necessary to be in compliance with such Laws.

(q)	Representations. Spider shall use its commercially reasonable efforts to conduct its affairs so that all of the representations and warranties of Spider contained herein shall be true and correct on and as of the Effective Date as if made on and as of such date.

(r)	Confirmatory Review. Subject to applicable Laws, until the Effective Date, Spider shall continue to make available and cause to be made available to KWG and the agents and advisors thereto all documents, agreements, corporate records and minute books as may be necessary to enable KWG to effect a thorough examination of Spider and the business, properties and financial status thereof, and shall cooperate with KWG in securing access for KWG to any documents, agreements, corporate records or minute books not in the possession or under the control of Spider. Subject to applicable Laws, upon reasonable notice, until the Effective Date, Spider shall afford officers, employees, counsel, accountants and other authorized representatives and advisors of KWG reasonable access, during normal business hours, to the properties, operations, books, contracts and records as well as to the management personnel of Spider and, during such period, Spider shall furnish promptly to KWG all information concerning the business, properties and personnel of Spider as KWG may reasonably request.

(s)	Closing Documents. Spider shall execute and deliver, or cause to be executed and delivered, at the closing of the transactions contemplated hereby such customary agreements, certificates, resolutions, opinions and other closing documents as may be required by KWG, all in form satisfactory to KWG, acting reasonably.

(t)	Consent of Spider Option Holders. Spider shall use its commercially reasonable efforts to obtain, prior to the Effective Date, consent to the exchange of Spider Options for New KWG Options from all Eligible Persons.

(u)	Consents relating to Spider Convertible Securities and Spider Agreements. Spider shall use its commercially reasonable efforts to obtain, prior to the Effective Date, an agreement, in form and substance satisfactory to KWG, from each of the holders of all outstanding Spider Convertible Securities (other than

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		Eligible Persons who consent, prior to the Effective Date, to the exchange of Spider Options for New KWG Options), and from each of the holders of all other rights to acquire securities of Spider under the Spider Agreements, that each such holder will accept, upon the valid exercise of any such Spider Convertible Security or other right to acquire securities of Spider which occurs after the completion of the Amalgamation, in lieu of each Spider Common Share which such holder was entitled to acquire, that number of KWG Common Shares equal to the Exchange Ratio or, as applicable, other securities of KWG, in each case subject to the approval of the TSXV and as determined in accordance with the terms and conditions of this Agreement and, as applicable, such Spider Convertible Security or applicable Spider Agreement.

	(v)	Notice to Third Parties Regarding Amalgamation. In accordance with the terms of each agreement pursuant to which Spider is required to provide notice of the Spider Meeting, the Amalgamation or the transactions contemplated hereby, Spider shall provide such notice on or before the earlier of the date required in such agreement and, to the extent it is possible, the Effective Date.

4.2	Covenants of KWG

Subject to Sections 6.3 and 6.4, KWG hereby covenants and agrees with Spider as follows:

	(a)	Information for Proxy Circular. In a timely and expeditious manner, KWG shall provide to Spider all information as may be reasonably requested by Spider or as required by applicable Laws with respect to KWG and its businesses and properties for inclusion in the Proxy Circular or in any amendment or supplement to the Proxy Circular that complies in all material respects with all applicable Laws on the date of the mailing thereof and containing all material facts relating to KWG required to be disclosed in the Proxy Circular and not containing any misrepresentation (as defined under applicable securities Laws) with respect thereto. KWG shall fully cooperate with Spider in the preparation of the Proxy Circular and shall provide such assistance as Spider may reasonably request in connection therewith.

	(b)	Amendments. In a timely and expeditious manner, KWG shall provide Spider with information as requested by Spider, acting reasonably, in order to prepare any amendments or supplements to the Proxy Circular (which amendments or supplements shall be in a form satisfactory to KWG, acting reasonably) with respect to the Spider Meeting.

	(c)	Copy of Documents. KWG shall furnish promptly to Spider a copy of any filing under any applicable Laws and any dealings or communications with any Governmental Entity, Securities Authority or stock exchange in connection with, or in any way affecting, the transactions contemplated by this Agreement.

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(d)	Certain Actions Prohibited. Other than in contemplation of or as required to give effect to the transactions contemplated by this Agreement or as otherwise permitted pursuant to this Agreement, KWG shall not, without the prior written consent of Spider, which consent shall not be unreasonably withheld or delayed, directly or indirectly do or permit to occur, or cause any of the KWG Subsidiaries to do any of the following:

	(i)	issue, sell, grant, pledge, lease, dispose of, encumber or create any Encumbrance on or agree to issue, sell, grant, pledge, lease, dispose of, or encumber or create any Encumbrance on any shares of, or any options, warrants, calls, conversion privileges or rights of any kind to acquire any shares of KWG other than:

		(A)	the issue of KWG Common Shares pursuant to the valid exercise of the KWG Options and KWG Warrants issued and outstanding on the date hereof in accordance with their terms as of the date hereof; or

		(B)	pursuant to the Permitted KWG Flow-Through Conversion;

	(ii)	other than pursuant to obligations or rights under existing contracts, agreements and commitments (to the extent such rights have been exercised or initiated by other Persons) or pursuant to the Spinoff, sell, lease, encumber or otherwise dispose of any property or assets or enter into any agreement or commitment in respect of any of the foregoing except where to do so would not have a Material Adverse Effect;

	(iii)	reduce its stated capital, or split, combine or reclassify any of the shares of KWG or, other than in connection with the Spinoff, declare, set aside or pay any dividend or other distribution payable in cash, securities, property or otherwise with respect to the KWG Common Shares;

	(iv)	redeem, purchase or offer to purchase, or permit any of the KWG Subsidiaries to redeem, purchase or offer to purchase, any KWG Common Shares and, other than pursuant to the KWG Stock Option Plan, any options or obligations or rights under existing contracts, agreements and commitments;

	(v)	adopt resolutions or enter into any agreement providing for the amalgamation, merger, consolidation, reorganization, liquidation, dissolution or any other extraordinary transaction in respect of itself, or adopt any plan of liquidation;

	(vi)	acquire or agree to acquire any corporation, partnership, business corporation (or other entity or material interest therein) or division of any corporation or other entity, or make any investment;

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		(vii)	(A) satisfy or settle any claim or dispute, except such as have been included in the interim consolidated financial statements of KWG for the three months ended March 31, 2010 and which are, individually or in the aggregate, in an amount in excess of $150,000; (B) relinquish any contractual rights that are, individually or in the aggregate, in an amount in excess of $150,000; or (C) enter into any interest rate, currency or commodity swaps, hedges, caps, collars, forward sales or other similar financial instruments;

		(viii)	amend or propose to amend the articles or by-laws of KWG or any of the KWG Subsidiaries as they exist at the date of this Agreement;

		(ix)	acquire any material assets, incur any indebtedness for borrowed money or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for, the obligations of any other individual or entity, or make any loans or advances, authorize, recommend or propose any release or relinquishment of any material contractual right, waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document, enter into or terminate any hedges, swaps or other similar financial instruments or transactions, enter into any agreements with its directors or officers or their respective affiliates, or authorize, propose, permit or agree to any of the above;

		(x)	enter into new commitments of a capital expenditure nature or incur any new contingent liabilities other than (A) ordinary course expenditures, (B) expenditures required by applicable Laws, (C) expenditures made in connection with transactions contemplated in this Agreement, and (D) capital expenditures required to prevent the occurrence of a Material Adverse Effect;

		(xi)	create any new obligations or liabilities or modify or in any manner amend any existing obligations and liabilities to pay any amount, including loan amounts, to its or their officers, directors, employees and consultants, other than for salary, bonuses under its or their existing bonus arrangements and directors’ fees in the ordinary course, in each case in amounts consistent with historic practices and obligations or liabilities or arising in the ordinary and regular course of business;

		(xii)	adopt or amend or make any contribution to any bonus, profit sharing, option, deferred compensation, insurance, incentive compensation, other compensation or other similar plan, agreement, trust, fund or arrangements for the benefit of employees, except as is necessary to comply with applicable Laws or with respect to existing provisions of any such plans, programs, arrangements or agreements;

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	(xiii)	take actions that could reasonably be expected to be prejudicial to the interests of Spider Shareholders in the business, property or assets of KWG and the KWG Subsidiaries following the closing of the Amalgamation; or

	(xiv)	except as required by Canadian GAAP or any applicable Laws, make any changes to the existing accounting practices of KWG or make any material tax election inconsistent with past practice.

(e)	Employment Agreements. Except where the prior intention to do so has been disclosed by KWG, KWG shall not, without the prior written consent of Spider, enter into or modify any employment, consulting, severance, collective bargaining or similar agreement, policy or arrangement with, or grant any bonus, salary increase, option to purchase shares, pension or supplemental pension benefit, profit sharing, retirement allowance, deferred compensation, incentive compensation, severance, change of control or termination pay to, or make any loan to, any officer, director, employee or consultant of KWG.

(f)	Insurance. KWG shall use its commercially reasonable efforts to cause its current insurance (or reinsurance) policies not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and re-insurance companies of internationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect.

(g)	Certain Actions. KWG shall:

	(i)	not take any action, or refrain from taking any action (subject to commercially reasonable efforts), or permit any action to be taken or not taken, inconsistent with the provisions of this Agreement or that would reasonably be expected to materially impede the completion of the transactions contemplated hereby or would render, or that could reasonably be expected to render, any representation or warranty made by KWG in this Agreement untrue or inaccurate in any material respect at any time on or before the Effective Date if then made or that would or could have a Material Adverse Effect on KWG;

	(ii)	promptly notify Spider of (A) any Material Adverse Change or Material Adverse Effect, or any change, event, occurrence or state of facts that could reasonably be expected to become a Material Adverse Change or to have a Material Adverse Effect, in respect of the business or in the conduct of the business of KWG, (B) any material Governmental Entity or third person complaints, investigations or hearings (or communications indicating that the same may be contemplated), (C) any breach by KWG of any covenant or agreement contained in this Agreement, and (D) any event occurring subsequent to the date hereof that would render any

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		representation or warranty of KWG contained in this Agreement, if made on or as of the date of such event or the Effective Date, to be untrue or inaccurate in any material respect;

	(iii)	subject to the terms of this Agreement, KWG shall not withdraw, modify, qualify or change in a manner materially adverse to Spider, or publicly propose to withdraw, modify, qualify or change in a manner materially adverse to Spider the approval, recommendation or declaration of advisability of the KWG Board with respect to the Amalgamation (a “Change of KWG Recommendation”); and

	(iv)	comply with the requirements of Rule 802(a)(2) and (3) under the 1933 Act in respect of the Amalgamation and the issuance of the KWG Common Shares pursuant thereto.

(h)	No Compromise. KWG shall not settle or compromise any claim brought by any present, former or purported holder of any securities of KWG in connection with the transactions contemplated by this Agreement on or before the Effective Date without the prior written consent of Spider.

(i)	Contractual Obligations. Without the prior written agreement of Spider, KWG shall not enter into, renew or modify in any respect any material contract, agreement, lease, commitment or arrangement to which KWG is a party or by which it is bound, except insofar as may be necessary to permit or provide for the completion of the Amalgamation or where to do so would not have a Material Adverse Effect.

(j)	Satisfaction of Conditions. KWG shall use all commercially reasonable efforts to satisfy, or cause to be satisfied, all of the conditions precedent to its obligations to the extent the same is within its control and to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable under all applicable Laws to complete the transactions contemplated by this Agreement, including using its commercially reasonable efforts to:

	(i)	obtain all consents, approvals and authorizations as are required to be obtained by KWG or any of the KWG Subsidiaries under any applicable Laws or from any Governmental Entity or under the rules or policies of the TSXV that would, if not obtained, materially impede the completion of the transactions contemplated by this Agreement or have a Material Adverse Effect on KWG;

	(ii)	effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the transactions contemplated by this Agreement and participate, and appear in any proceedings of, any party hereto before any Governmental Entity;

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	(iii)	oppose, lift or rescind any injunction or restraining order or other order or action challenging or affecting this Agreement, the transactions contemplated hereby or seeking to enjoin or delay, or otherwise adversely affecting the ability of the parties hereto to consummate, the transactions contemplated hereby, subject to the KWG Board determining in good faith after receiving advice from outside legal counsel (which may include written opinions or advice) that taking such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided that, immediately upon receipt of such advice, KWG advises Spider in writing that it has received such advice and provides written details thereof to Spider;

	(iv)	fulfill all conditions and satisfy all provisions of this Agreement and the Amalgamation required to be fulfilled or satisfied by it, and

	(v)	cooperate with Spider in connection with the performance by Spider of its obligations hereunder, provided however that the foregoing shall not be construed to obligate KWG to pay or cause to be paid any monies to cause such performance to occur, other than as contemplated in this Agreement.

(k)	Cooperation. KWG shall make, or cooperate as necessary in the making of, all necessary filings and applications under all applicable Laws required in connection with the transactions contemplated hereby and take all reasonable action necessary to be in compliance with such Laws.

(l)	Representations. KWG shall use its commercially reasonable efforts to conduct its affairs and to cause the KWG Subsidiaries to conduct their affairs so that all of the representations and warranties of KWG contained herein shall be true and correct on and as of the Effective Date as if made on and as of such date.

(m)	Confirmatory Review. Subject to applicable Laws, until the Effective Date, KWG shall continue to make available and cause to be made available to Spider and the agents and advisors thereto all documents, agreements, corporate records and minute books as may be necessary to enable Spider to effect a thorough examination of KWG and the KWG Subsidiaries and the business, properties and financial status thereof, and shall cooperate with Spider in securing access for Spider to any documents, agreements, corporate records or minute books not in the possession or under the control of KWG. Subject to applicable Laws, upon reasonable notice, until the Effective Date, KWG shall, and shall cause the KWG Subsidiaries to, afford officers, employees, counsel, accountants and other authorized representatives and advisors of Spider reasonable access, during normal business hours to the properties, books, contracts and records as well as to the management personnel of KWG and the KWG Subsidiaries, and, during such period, KWG shall, and shall cause the KWG Subsidiaries to, furnish promptly to Spider all information concerning the business, properties and personnel of KWG and the KWG Subsidiaries as Spider may reasonably request.

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(n)	Closing Documents. KWG shall execute and deliver, or cause to be executed and delivered, at the closing of the transactions contemplated hereby such customary agreements, certificates, opinions, resolutions and other closing documents as may be required by Spider, all in form satisfactory to Spider, acting reasonably.

(o)	Usual Business. Other than in contemplation of or as required to give effect to the transactions contemplated by this Agreement (including the Spinoff), from the date hereof until the earlier of the date of the Termination Date and the Effective Date, KWG shall and shall cause the KWG Subsidiaries to conduct its business only, and shall not take any action except in the ordinary and regular course of business consistent with its past practices.

	For the purposes of this Section 4.2(o), any payment outside of the ordinary course of business by KWG of an amount in excess of $150,000, which obligation did not exist at the date of this Agreement, or any obligation or agreement by KWG created after the date of this Agreement providing for payment by KWG of an amount in excess of $150,000 and not disclosed by KWG to Spider as of the date of this Agreement, shall in each case be deemed to not be in the ordinary course consistent with past practices of KWG, and shall require the prior written approval of Spider, which approval shall not be unreasonably withheld or delayed.

(p)	Keep Fully Informed. Subject to applicable Laws, KWG shall use commercially reasonable efforts to conduct itself so as to keep Spider fully informed as to the material decisions or actions required or required to be made with respect to the operation of its business.

(q)	Newco. In its capacity as the sole shareholder of Newco, KWG shall:

	(i)	take all such action as is necessary or desirable to cause Newco to satisfy its obligations hereunder, including without limitation, passing a resolution, on or prior to the Effective Date in form and substance satisfactory to each of KWG and Spider, acting reasonably, duly approving the Amalgamation; and

	(ii)	prior to the Effective Date, not cause or permit Newco to issue any securities or enter into any agreements to issue or grant options, warrants or rights to purchase any of its securities except for the issuance of a nominal number of Newco Shares to KWG, or carry on any business, enter into any transaction or effect any corporate act whatsoever, other than as contemplated herein or as reasonably necessary to carry out the Amalgamation, unless previously consented to in writing by Spider; and

	(iii)	after the Effective Date, cause Amalco to satisfy any obligations which Amalco may have to a Spider Shareholder who exercises Dissent Rights.

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	(r)	Shares. KWG will issue, at the Effective Time, KWG Common Shares, in accordance with the terms hereof, to those Spider Shareholders who are entitled to receive KWG Common Shares pursuant to the Amalgamation.

4.3	Mutual Covenants of KWG and Spider

As soon as practicable, KWG and Spider each shall file merger notification forms required by the merger notification or control Laws of any applicable jurisdiction, which KWG and Spider reasonably determine to be necessary. KWG and Spider each shall promptly: (a) supply the other with any information which may be required in order to effectuate such filings; (b) supply any additional information which reasonably may be required by the competition or merger control authorities of any other jurisdiction; and (c) take all commercially reasonable action to obtain any required approval from such competition or merger control authorities.

Each of the Parties agrees that, following the conclusion of the Spider Meeting at which the Spider Resolution is passed, it shall complete the Amalgamation prior to the close of business on the Completion Deadline.

4.4	Spider Options

KWG shall take all corporate action necessary to reserve for issuance a sufficient number of KWG Common Shares for delivery upon the exercise of the New KWG Options granted in accordance with Section 2.5(a).

4.5	Spider Convertible Securities

KWG shall take all corporate action necessary to reserve for issuance a sufficient number of KWG Common Shares for delivery upon the exercise of the Spider Options (which have not been exchanged for New KWG Options and which have not expired), Spider Warrants, Spider Unit Compensation Options and Spider Unit Warrants (underlying such Spider Unit Compensation Options) outstanding immediately following completion of the Amalgamation.

ARTICLE 5

CONDITIONS

5.1	Mutual Conditions in Favour of KWG and Spider

The respective obligations of Spider and KWG to complete the transactions contemplated herein are subject to the fulfillment of the following conditions at or before the Effective Time or such other time as is specified below:

	(a)	the Spider Shareholder Approval shall have been obtained at the Spider Meeting in accordance with the provisions of the CBCA and the requirements of any applicable regulatory authority;

	(b)	there shall not be in force any Law, ruling, order or decree, and there shall not have been any action taken under any Law or by any Governmental Entity or other regulatory authority, that makes it illegal or otherwise directly or indirectly

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		restrains, enjoins or prohibits the consummation of the Amalgamation in accordance with the terms hereof or results or could reasonably be expected to result in a judgment, order, decree or assessment of damages, directly or indirectly, relating to the Amalgamation that has, or could reasonably be expected to have, a Material Adverse Effect on Spider or KWG;

	(c)	(A) the KWG Common Shares shall be listed and posted for trading on the TSXV; (B) the TSXV shall have conditionally approved the listing thereon, subject to official notice of issuance, of the KWG Common Shares to be issued pursuant to the Amalgamation or as otherwise contemplated herein (including the KWG Common Shares which are issuable upon the exercise of the New KWG Options and the Spider Options (which have not been exchanged for New KWG Options and which have not expired), Spider Warrants, Spider Unit Compensation Options and Spider Unit Warrants (underlying such Spider Unit Compensation Options) outstanding immediately following completion of the Amalgamation) as of the Effective Date, or as soon as possible thereafter, and (C) the TSXV shall have, if required, accepted notice for filing of all transactions of each of KWG and Spider contemplated herein or necessary to complete the Amalgamation, subject only to compliance with the usual requirements of the TSXV, as applicable;

	(d)	(A) all consents, waivers, permits, exemptions, orders and approvals of, and any registrations and filings with, any Governmental Entity, in connection with, or required to permit, the completion of the Amalgamation including, without limitation, the laws of any jurisdiction which KWG and Spider reasonably determine to be applicable, and (B) all third person and other consents, waivers, permits, exemptions, orders, approvals, agreements and amendments and modifications to agreements, indentures or arrangements, the failure of which to obtain or the non-expiry of which would, or could reasonably be expected to have, a Material Adverse Effect on Spider or KWG or materially impede the completion of the Amalgamation, shall have been obtained or received on terms that are reasonably satisfactory to each Party;

	(e)	the KWG Common Shares to be issued pursuant to the Amalgamation shall be exempt from registration requirements under Rule 802 under the 1933 Act;

	(f)	the Spinoff shall have been completed;

	(g)	this Agreement shall not have been terminated pursuant to Section 7.3; and

	(h)	the Amalgamation shall have been completed on or before the Completion Deadline.

The foregoing conditions are for the mutual benefit of the Parties and may be waived by mutual consent of KWG and Spider in writing at any time. If any of such conditions shall not be complied with or waived as aforesaid on or before the Completion Deadline or, if earlier, the date required for the performance thereof, then, subject to Sections 5.4, 7.3, 7.4 and 7.5,

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as applicable, any Party may terminate this Agreement by written notice to the other parties hereto in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of a breach of this Agreement by such rescinding Party.

5.2	Spider Conditions

The obligation of Spider to complete the transactions contemplated herein is subject to the fulfillment of the following additional conditions at or before the Effective Time or such other time as is specified below:

	(a)	the representations and warranties made by KWG in this Agreement that are qualified by the expression “Material Adverse Change” or “Material Adverse Effect” shall be true and correct as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), and all other representations and warranties made by KWG in this Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), in either case, except where any failures or breaches of representations and warranties would not either individually or in the aggregate, in the reasonable judgment of Spider, have a Material Adverse Effect on KWG, and KWG shall have provided to Spider a certificate of two officers thereof certifying such accuracy or lack of Material Adverse Effect on the Effective Date. No representation or warranty made by KWG hereunder shall be deemed not to be true and correct if the facts or circumstances which make such representation or warranty untrue or incorrect are disclosed or referred to, or provided for, or stated to be exceptions under this Agreement;

	(b)	from the date of this Agreement to the Effective Date, there shall not have occurred a Material Adverse Change in respect of KWG;

	(c)	KWG shall have complied in all material respects with its covenants herein and KWG shall have provided to Spider a certificate of two officers thereof, certifying that, as of the Effective Date, it has so complied with their covenants herein;

	(d)	the KWG Board shall have adopted all necessary resolutions and all other necessary corporate action shall have been taken by KWG and Newco to permit the consummation of the Amalgamation;

	(e)	the KWG Board shall not have effected a Change of KWG Recommendation; and

	(f)	a Flip-in Event for purposes of the KWG Shareholder Rights Plan shall not have occurred.

The foregoing conditions are for the benefit of Spider and may be waived, in whole or in part, by Spider in writing at any time. If any of such conditions shall not be complied with or waived by

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Spider on or before the Completion Deadline or, if earlier, the date required for the performance thereof, then, subject to Sections 5.4, 7.3 and 7.5, Spider may terminate this Agreement by written notice to KWG in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of a breach of this Agreement by Spider.

5.3	KWG Conditions

The obligation of KWG to complete the transactions contemplated herein is subject to the fulfillment of the following additional conditions at or before the Effective Time or such other time as is specified below:

	(a)	the representations and warranties made by Spider in this Agreement that are qualified by the expression “Material Adverse Change” or “Material Adverse Effect” shall be true and correct as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), and all other representations and warranties made by Spider in this Agreement that are not so qualified shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), in either case, except where any failures or breaches of representations and warranties would not either, individually or in the aggregate, in the reasonable judgment of KWG, have a Material Adverse Effect on Spider, and Spider shall have provided to KWG a certificate of two officers thereof certifying such accuracy or lack of Material Adverse Effect on the Effective Date. No representation or warranty made by Spider hereunder shall be deemed not to be true and correct if the facts or circumstances that make such representation or warranty untrue or incorrect are disclosed or referred to, or provided for, or stated to be exceptions under this Agreement;

	(b)	from the date of this Agreement to the Effective Date, there shall not have occurred a Material Adverse Change in respect of Spider;

	(c)	Spider shall have complied in all material respects with its covenants herein and Spider shall have provided to KWG a certificate of two officers thereof certifying that, as of the Effective Date, Spider has so complied with its covenants herein;

	(d)	provided that KWG shall have materially fulfilled its obligations under Section 4.2(a), Spider shall have caused the Proxy Circular and all related material to be mailed to the Spider Shareholders no later than June 21, 2010 or such other date as the Parties may agree, acting reasonably;

	(e)	Spider Shareholders holding no more than 10% of the outstanding Spider Common Shares shall have exercised their Dissent Rights (and not withdrawn such exercise) and KWG shall have received a certificate dated the day immediately preceding the Effective Date of two officers of Spider to such effect;

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	(f)	the Spider Board shall have adopted all necessary resolutions and all other necessary corporate action shall have been taken by Spider to permit the consummation of the Amalgamation;

	(g)	the Spider Board shall not have effected a Change of Spider Recommendation;

	(h)	the Spider Board shall have received an opinion from its financial advisors that the Amalgamation is fair, from a financial point of view, to the Spider Shareholders and all of the directors of Spider who shall have attended the meeting at which the Amalgamation was considered shall have:

		(i)	determined that the Amalgamation is fair to the Spider Shareholders and the Amalgamation is in the best interests of Spider; and

		(ii)	recommended that the Spider Shareholders vote in favour of the Amalgamation;

	(i)	a Flip-in Event for purposes of the Spider Shareholder Rights Plan shall not have occurred; and

	(j)	Spider shall have delivered to KWG all of the agreements contemplated in Section 4.1(u) and no securities of Amalco shall be issuable pursuant to any exercise, occurring after the completion of the Amalgamation, of a Spider Convertible Security or other right to acquire securities under any of the Spider Agreements.

The foregoing conditions are for the benefit of KWG and may be waived, in whole or in part, by KWG in writing at any time. If any of such conditions shall not be complied with or waived by KWG on or before the Completion Deadline or, if earlier, the date required for the performance thereof, then, subject to Sections 5.4, 7.3 and 7.4, KWG may terminate this Agreement by written notice to Spider in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of a breach of this Agreement by KWG.

5.4	Notice and Cure Provisions

Each Party hereto shall give prompt notice to the other Party of the occurrence, or failure to occur, at any time from the date hereof until the Effective Date, of any event or state of facts which occurrence or failure would, would be likely to or could:

	(a)	cause any of the representations or warranties of such Party contained herein to be untrue or inaccurate in any respect on the date hereof or on the Effective Date;

	(b)	result in the failure to comply with or satisfy any covenant or agreement to be complied with or satisfied by such Party on or before the Effective Date; or

	(c)	result in the failure to satisfy any of the conditions precedent in favour of the other Parties contained in Section 5.1, 5.2 or 5.3, as the case may be.

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Subject as herein provided, a Party may (a) elect not to complete the transactions contemplated hereby by virtue of any of the conditions for its benefit contained in Section 5.1, 5.2 or 5.3 not being satisfied or waived or (b) exercise any termination right arising therefrom; provided, however, that (i) promptly and in any event prior to the earlier of the Effective Date and the Completion Deadline, the Party hereto intending to rely thereon has delivered a written notice to the other Party specifying in reasonable detail the breaches of covenants or untruthfulness or inaccuracy of representations and warranties or other matters that the Party delivering such notice is asserting as the basis for the exercise of the termination right, as the case may be, (ii) if any such notice is delivered, the Party that has delivered such notice may not terminate this Agreement until the lesser of ten (10) days from the date of delivery of such notice and the number of days remaining before the earlier of the Effective Date and the Completion Deadline, and (iii) if the other Party proceeds diligently, at its own expense, to cure such matter (if such matter is susceptible to being cured) and, in fact, cures such matter within such period, the Party that has delivered such notice may not terminate this Agreement.

5.5	Merger of Conditions

If no notice has been sent by either Party pursuant to Section 5.4 on or before the Effective Date, the conditions set out in Section 5.1, 5.2 or 5.3 shall be conclusively deemed to have been satisfied, fulfilled or waived as of the Effective Time.

ARTICLE 6

NON-SOLICITATION AND STANDSTILL

6.1	Spider Covenant Regarding Non-Solicitation

	(a)	Spider shall not, directly or indirectly, through any officer, director, employee, representative, advisor or agent of Spider, or otherwise:

		(i)	make, solicit, initiate, facilitate, entertain, encourage, engage in, respond to or promote (including by way of furnishing information, permitting any visit to facilities or properties of Spider or entering into any form of agreement, arrangement or understanding) any inquiries, submissions, proposals or offers regarding, constituting or that may reasonably be expected to lead to a Spider Alternative Proposal or potential Spider Alternative Proposal;

		(ii)	encourage or participate, directly or indirectly, in any discussions or negotiations regarding, or furnish to any Person any information or otherwise co-operate with, respond to, assist or participate in, any Spider Alternative Proposal or potential Spider Alternative Proposal;

		(iii)	agree to, accept, approve or recommend, or propose publicly to agree to, accept, approve or recommend any Spider Alternative Proposal or potential Spider Alternative Proposal (it being understood that publicly taking no position or a neutral position with respect to a Spider Alternative Proposal until fifteen (15) days following formal commencement of such

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		Spider Alternative Proposal shall not be considered a violation of this Section 6.1(a)(iii)); or

	(iv)	accept, enter into, or propose publicly to accept or enter into, any agreement, understanding or arrangement related to any Spider Alternative Proposal or potential Spider Alternative Proposal;

	provided, however, that, notwithstanding the preceding part of this Section 6.1(a), but subject to the following provisions of this Section 6.1, the Spider Board, and on the direction of any of the directors of Spider, any officer, employee, representative, agent or advisor of Spider, may, prior to the approval of the Amalgamation by Spider Shareholders, consider, participate in discussions or negotiate or provide information to any other Person who has delivered or issued an unsolicited Spider Alternative Proposal that the Spider Board determines in good faith, after consultation with its outside legal counsel and financial advisors, would, if consummated in accordance with its terms, constitute a Spider Superior Proposal, and the Spider Board may make a Change of Spider Recommendation in respect of such Spider Superior Proposal, or accept, approve or recommend to the Spider Shareholders or enter into an agreement in respect of such Spider Superior Proposal in accordance with the provisions of the following subsections of this Section 6.1, but in each case only if the Spider Superior Proposal did not result from a breach of this Agreement by Spider and the Spider Board determines in good faith after receiving advice from outside legal counsel (which may include written opinions or advice) that failure to take such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided further that, immediately upon receipt of such advice, Spider advises KWG in writing that it has received such advice and provides written details thereof to KWG.

(b)	Spider shall, and shall cause the officers, directors, employees, consultants, representatives and agents of Spider to, immediately terminate and cease any discussions or negotiations with any parties (other than KWG) with respect to any proposal that constitutes, or may reasonably be expected to constitute, a Spider Alternative Proposal. Spider agrees not to release any third party from any confidentiality agreement relating to a potential Spider Alternative Proposal to which such third party is a party. Spider further agrees not to release any third party from any standstill agreement or provision to which such third party is a party. Spider shall immediately request the return or destruction of all information provided to any third party that has entered into a confidentiality agreement with Spider relating to a potential Spider Alternative Proposal to the extent that such information has not previously been returned or destroyed, and shall use all commercially reasonable efforts to ensure that such requests are honoured.

(c)	Promptly and, in any event, within 24 hours of the receipt by any director or officer of Spider of any Spider Alternative Proposal, or any amendment to the foregoing, or any request for non-public information relating to Spider in connection with any potential Spider Alternative Proposal or for access to the

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		properties, books or records of Spider by any Person that informs Spider that it is considering making, or has made, a Spider Alternative Proposal, Spider shall notify KWG thereof, at first orally and then, as soon as possible thereafter, in writing. Such written notice shall include the identity of the Person(s) making such proposal and all material terms and conditions of the Spider Alternative Proposal and provide such other details of the Spider Alternative Proposal, inquiry or contact as KWG may reasonably request.

	(d)	If Spider receives a request for material non-public information from a Person who is considering making or has made a written Spider Alternative Proposal (the existence and content of which have been disclosed to KWG), and the Spider Board determines that such proposal could, if consummated in accordance with its terms, reasonably be expected to result in a Spider Superior Proposal or does constitute a Spider Superior Proposal and Spider is permitted, subject to and as contemplated under this Section 6.1(d) then, and only in such case, the Spider Board may, subject to the execution of a confidentiality agreement on terms and conditions that are not more favourable to such Person making or considering making the Spider Alternative Proposal than those set forth in the Confidentiality Agreement and which includes a standstill provision that restricts such Person from acquiring, or publicly announcing an intention to acquire, any securities or assets of Spider (other than pursuant to a Spider Superior Proposal) for a period of not less than two (2) years from the date of such agreement, provide such Person with access to information regarding Spider; provided, however, that Spider sends a copy of any such confidentiality agreement to KWG immediately upon the execution thereof and KWG is provided with a list of or a copy of the information, if any, provided to such Person that was not previously provided to KWG and KWG is immediately provided with access to similar information.

	(e)	Spider shall ensure that its officers, directors, consultants and employees and any financial advisors or other advisors or representatives retained by Spider are aware of the provisions of this Section 6.1, and Spider shall be responsible for any breach of this Section 6.1 by its financial advisors or other advisors or representatives.

	(f)	For greater certainty, Spider may respond to an unsolicited Spider Alternative Proposal, but may not consider an unsolicited Spider Alternative Proposal or participate in discussions or negotiate or provide information to any other Person who has delivered or issued an unsolicited Spider Alternative Proposal, other than in accordance with this Section 6.1.

6.2	Notice of Spider Superior Proposal Determination

	(a)	Spider and the Spider Board shall not accept, approve, recommend or enter into any agreement in respect of a Spider Alternative Proposal (other than a confidentiality agreement and a standstill agreement contemplated by Section 6.1(d)) on the basis that it would constitute a Spider Superior Proposal, unless:

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	(i)	Spider has complied with its obligations under Section 6.1 and the other provisions of this Article 6;

	(ii)	such Spider Superior Proposal does not provide for the payment of any break, termination or other fees or expenses to the other party in the event that Spider completes the Amalgamation or any similar other transaction with KWG or any of its affiliates agreed prior to any termination of this Agreement;

	(iii)	it has provided KWG with the information about such Spider Alternative Proposal as required under Section 6.1(c) that the Spider Board has determined would be a Spider Superior Proposal pursuant to Section 6.1(a); and

	(iv)	five (5) Business Days shall have elapsed from the later of the date KWG received notice of the determination of the Spider Board to accept, approve, recommend or enter into an agreement in respect of such Spider Superior Proposal and the date KWG received the documents pursuant to Section 6.1(c).

(b)	During the five (5) Business Days referred to in Section 6.2(a)(iv), KWG shall have the opportunity, but not the obligation, to offer in writing to amend the terms of this Agreement and the Amalgamation. The Spider Board shall review any offer by KWG to amend the terms of this Agreement and the Amalgamation in order to determine in good faith, as of the later of the dates referred to in Section 6.2(a)(iv), whether the offer of KWG upon acceptance by Spider would result in the Spider Alternative Proposal not being a Spider Superior Proposal. If the Spider Board so determines, Spider shall enter into an amended agreement with KWG reflecting the amended proposal of KWG and will promptly reaffirm its recommendation of the Amalgamation as amended.

(c)	Spider acknowledges and agrees that each successive modification of any Spider Alternative Proposal shall constitute a new Spider Alternative Proposal for purposes of the requirement under Section 6.2(a)(iv) and shall initiate an additional five (5) Business Day period.

(d)	If the Proxy Circular has been sent to Spider Shareholders prior to the expiry of the five (5) Business Day period set forth in Section 6.2(a)(iv) and, during such period, KWG requests in writing that the Spider Meeting proceed, Spider shall continue to take all reasonable steps necessary to hold the Spider Meeting and to cause the Amalgamation to be voted on at the Spider Meeting.

(e)	Where at any time before a Spider Meeting, Spider has provided KWG with a notice under Section 6.1(c), a Spider Alternative Proposal has been publicly disclosed or announced, and the five (5) Business Day period under Section 6.2(a)(iv) has not elapsed, then, subject to applicable Laws, at KWG’s request, Spider will postpone or adjourn such Spider Meeting at such Spider Meeting (but

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		not beforehand without KWG’s consent) to a date acceptable to KWG, acting reasonably, which shall not be less than five (5) and not more than ten (10) Business Days after the latest scheduled date of such Spider Meeting and shall, in the event that KWG and Spider amend the terms of this Agreement pursuant to Section 6.2(b), use its commercially reasonable efforts to ensure that the details of such amended Agreement are communicated to the Spider Shareholders prior to the resumption of such adjourned Spider Meeting.

6.3	KWG Covenant Regarding Non-Solicitation

	(a)	KWG shall not, directly or indirectly, through any officer, director, employee, representative, advisor or agent of KWG or any of the KWG Subsidiaries, or otherwise:

		(i)	make, solicit, initiate, facilitate, entertain, encourage, engage in, respond to or promote (including by way of furnishing information, permitting any visit to facilities or properties of KWG or any KWG Subsidiary or entering into any form of agreement, arrangement or understanding) any inquiries, submissions, proposals or offers regarding, constituting or that may reasonably be expected to lead to a KWG Alternative Proposal or potential KWG Alternative Proposal;

		(ii)	encourage or participate, directly or indirectly, in any discussions or negotiations regarding, or furnish to any Person any information or otherwise co-operate with, respond to, assist or participate in, any KWG Alternative Proposal or potential KWG Alternative Proposal;

		(iii)	agree to, accept, approve or recommend, or propose publicly to agree to, accept, approve or recommend any KWG Alternative Proposal or potential KWG Alternative Proposal (it being understood that publicly taking no position or a neutral position with respect to a KWG Alternative Proposal until fifteen (15) days following formal commencement of such KWG Alternative Proposal shall not be considered a violation of this Section 6.3(a)(iii)); or

		(iv)	accept, enter into, or propose publicly to accept or enter into, any agreement, understanding or arrangement related to any KWG Alternative Proposal or potential KWG Alternative Proposal;

		provided, however, that, notwithstanding the preceding part of this Section 6.3(a), but subject to the following provisions of this Section 6.3, the KWG Board, and on the direction of any of the directors of KWG, any officer, employee, representative, agent or advisor of KWG, may, prior to the approval of the Amalgamation by Spider Shareholders, consider, participate in discussions or negotiate or provide information to any other Person who has delivered or issued an unsolicited KWG Alternative Proposal that the KWG Board determines in good faith, after consultation with its outside legal counsel and financial advisors,

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		would, if consummated in accordance with its terms, constitute a KWG Superior Proposal, and the KWG Board may make a Change of KWG Recommendation in respect of such KWG Superior Proposal, or accept, approve or recommend to the KWG Shareholders or enter into an agreement in respect of such KWG Superior Proposal in accordance with the provisions of the following subsections of this Section 6.3, but in each case only if the KWG Superior Proposal did not result from a breach of this Agreement by KWG and the KWG Board determines in good faith after receiving advice from outside legal counsel (which may include written opinions or advice) that failure to take such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided further that, immediately upon receipt of such advice, KWG advises Spider in writing that it has received such advice and provides written details thereof to Spider.

	(b)	KWG shall, and shall cause the officers, directors, employees, consultants, representatives and agents of KWG and the KWG Subsidiaries to, immediately terminate and cease any discussions or negotiations with any parties (other than Spider) with respect to any proposal that constitutes, or may reasonably be expected to constitute, a KWG Alternative Proposal. KWG agrees not to release any third party from any confidentiality agreement relating to a potential KWG Alternative Proposal to which such third party is a party. KWG further agrees not to release any third party from any standstill agreement or provision to which such third party is a party. KWG shall immediately request the return or destruction of all information provided to any third party that has entered into a confidentiality agreement with KWG relating to a potential KWG Alternative Proposal to the extent that such information has not previously been returned or destroyed, and shall use all commercially reasonable efforts to ensure that such requests are honoured.

	(c)	Promptly and, in any event, within 24 hours of the receipt by any director or officer of KWG of any KWG Alternative Proposal, or any amendment to the foregoing, or any request for non-public information relating to KWG or any of the KWG Subsidiaries in connection with any potential KWG Alternative Proposal or for access to the properties, books or records of KWG or any of the KWG Subsidiaries by any Person that informs KWG or any of the KWG Subsidiaries that it is considering making, or has made, a KWG Alternative Proposal, KWG shall notify Spider thereof, at first orally and then, as soon as possible thereafter, in writing. Such written notice shall include the identity of the Person(s) making such proposal and all material terms and conditions of the KWG Alternative Proposal and provide such other details of the KWG Alternative Proposal, inquiry or contact as Spider may reasonably request.

	(d)	If KWG receives a request for material non-public information from a Person who is considering making or has made a written KWG Alternative Proposal (the existence and content of which have been disclosed to Spider), and the KWG Board determines that such proposal could, if consummated in accordance with its terms, reasonably be expected to result in a KWG Superior Proposal or does

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		constitute a KWG Superior Proposal and KWG is permitted, subject to and as contemplated under this Section 6.3(d) then, and only in such case, the KWG Board may, subject to the execution of a confidentiality agreement on terms and conditions that are not more favourable to such Person making or considering making the Spider Alternative Proposal than those set forth in the Confidentiality Agreement and which includes a standstill provision that restricts such Person from acquiring, or publicly announcing an intention to acquire, any securities or assets of KWG (other than pursuant to a KWG Superior Proposal) for a period of not less than two (2) years from the date of such agreement, provide such Person with access to information regarding KWG; provided, however, that KWG sends a copy of any such confidentiality agreement to Spider immediately upon the execution thereof and Spider is provided with a list of or a copy of the information, if any, provided to such Person that was not previously provided to Spider and Spider is immediately provided with access to similar information.

	(e)	KWG shall ensure that its officers, directors, consultants and employees and any financial advisors or other advisors or representatives retained by KWG are aware of the provisions of this Section 6.3, and KWG shall be responsible for any breach of this Section 6.3 by its financial advisors or other advisors or representatives.

	(f)	For greater certainty, KWG may respond to an unsolicited KWG Alternative Proposal, but may not consider an unsolicited KWG Alternative Proposal or participate in discussions or negotiate or provide information to any other Person who has delivered or issued an unsolicited KWG Alternative Proposal, other than in accordance with this Section 6.3.

6.4	Notice of KWG Superior Proposal Determination

	(a)	KWG and the KWG Board shall not accept, approve, recommend or enter into any agreement in respect of a KWG Alternative Proposal (other than a confidentiality agreement and a standstill agreement contemplated by Section 6.3(d)) on the basis that it would constitute a KWG Superior Proposal, unless:

		(i)	KWG has complied with its obligations under Section 6.3 and the other provisions of this Article 6;

		(ii)	such KWG Superior Proposal does not provide for the payment of any break, termination or other fees or expenses to the other party in the event that KWG completes the Amalgamation or any similar other transaction with Spider or any of its affiliates agreed prior to any termination of this Agreement;

		(iii)	it has provided Spider with the information about such KWG Alternative Proposal as required under Section 6.3© that the KWG Board has determined would be a KWG Superior Proposal pursuant to Section 6.3(a); and

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		(iv)	five (5) Business Days shall have elapsed from the later of the date Spider received notice of the determination of the KWG Board to accept, approve, recommend or enter into an agreement in respect of such KWG Superior Proposal and the date Spider received the documents pursuant to Section 6.3(c).

	(b)	During the five (5) Business Days referred to in Section 6.4(a)(iv), Spider shall have the opportunity, but not the obligation, to offer in writing to amend the terms of this Agreement and the Amalgamation. The KWG Board shall review any offer by Spider to amend the terms of this Agreement and the Amalgamation in order to determine in good faith, as of the later of the dates referred to in Section 6.4(a)(iv), whether the offer of Spider upon acceptance by KWG would result in the KWG Alternative Proposal not being a KWG Superior Proposal. If the KWG Board so determines, KWG shall enter into an amended agreement with Spider reflecting the amended proposal of Spider and will promptly reaffirm its recommendation of the Amalgamation as amended.

	(c)	KWG acknowledges and agrees that each successive modification of any KWG Alternative Proposal shall constitute a new KWG Alternative Proposal for purposes of the requirement under Section 6.4(a)(iv) and shall initiate an additional five (5) Business Day period.

6.5	Cliffs Bids Not Superior

Notwithstanding any other provision of this Agreement:

	(a)	Spider acknowledges and agrees that the Cliffs Spider Bid shall not constitute a Spider Superior Proposal; and

	(b)	KWG acknowledges and agrees that a Cliffs KWG Bid shall not constitute a KWG Superior Proposal.

6.6	Standstill

Each Party covenants and agrees that it shall not, and it shall use its commercially reasonable efforts to cause its directors, officers, employees and their respective affiliates (including any Person, directly or indirectly, through one or more intermediaries, controlled by or under common control with it or acting jointly or in concert with it or such Person) not to, directly or indirectly, without the prior written consent of the other Party:

	(a)	commence a take-over bid (as defined in the Securities Act (Ontario)) for any securities of the other Party;

	(b)	solicit proxies of the shareholders of the other Party, or form, join or in any way participate in a proxy group, or seek to advise or influence any Person with respect to the voting of any voting securities of the other Party;

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	(c)	act alone or with others to seek to control or influence the management, the board of directors or the policies of the other Party, other than as contemplated by this Agreement;

	(d)	make any public announcement with respect to the foregoing, except as may be required by applicable Laws; or

	(e)	assist, advise or encourage any Person in doing any of the foregoing (including, without limitation, by providing or arranging financing).

Each Party acknowledges and agrees that, in the event that it acquires any securities of the other Party prior to the Completion Deadline, it will provide prompt written notice thereof to such other Party.

ARTICLE 7

AMENDMENT, TERMINATION AND BREAK FEES

7.1	Amendment

This Agreement may, at any time and from time to time before or after the holding of the Spider Meeting be amended by mutual written agreement of the parties hereto without, subject to applicable Laws, further notice to or authorization on the part of the Spider Shareholders and any such amendment may, without limitation:

	(a)	change the time for the performance of any of the obligations or acts of any of the parties hereto;

	(b)	waive any inaccuracies in or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

	(c)	waive compliance with or modify any of the covenants herein contained and waive or modify the performance of any of the obligations of any of the parties hereto; and

	(d)	waive compliance with or modify any condition herein contained;

provided, however, that notwithstanding the foregoing, following the Spider Meeting, no amendments to the definition of “Exchange Ratio” as it applies to the Spider Common Shares which are adverse in interest to Spider Shareholders, nor to Section 2.5(b), shall be made without the approval of the Spider Shareholders given in the same manner as required for the approval of the Amalgamation.

7.2	Mutual Understanding of KWG and Spider Regarding Amendments

	(a)	In addition to the transactions contemplated hereby or at the request of a Party, the Parties will continue from and after the date hereof and through and including the Effective Date to use their respective commercially reasonable efforts to maximize present and future planning opportunities for Spider, the Spider

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		Shareholders, KWG, the KWG Shareholders and the KWG Subsidiaries as and to the extent that the same shall not prejudice any Party or the shareholders thereof. The Parties will ensure that such planning activities do not impede the progress of the Amalgamation in any material way.

	(b)	The Parties mutually agree that if a Party proposes any other amendment or amendments to this Agreement or to the Amalgamation, Spider on the one hand, and KWG on the other hand, will act reasonably in considering such amendment and if the other of them and the shareholders thereof are not materially prejudiced by reason of any such amendment they will co-operate in a reasonable fashion with the Party proposing the amendment so that such amendment can be effected subject to applicable Laws and the rights of the Spider Shareholders.

	(c)	At any time and from time to time prior to the Effective Time: (i) Spider and KWG shall each be entitled to propose to the other modifications to the Amalgamation in order to facilitate the tax or other planning objectives of Spider, KWG, the Spider Shareholders and the KWG Shareholders; and (ii) Spider shall be entitled to propose to KWG modifications to the manner in which the Spider Warrants, Spider Options and Spider Unit Compensation Options are to be dealt with pursuant to this Agreement or under the Amalgamation in order to take into account the tax planning or other objectives of the holders of such securities, provided, in each case that: (A) any such proposal is not likely to materially prejudice the other Party, the Spider Shareholders or the KWG Shareholders, (B) any such proposal would not impede or materially delay the completion of the transactions contemplated hereby, (C) the Party making such proposal has provided notice of such proposal to the other Party not less than three (3) Business Days prior to the Effective Date and (D) implementation of such proposal would not result in a transaction that is inconsistent with the fundamental terms of this Agreement, including, without limitation, the Exchange Ratio.

		Each of Spider and KWG agree that any such modifications and any transactions or steps taken in accordance therewith shall not be considered in determining whether any representation or warranty made by them under this Agreement has been breached if such modifications, transactions and steps are the sole cause of such breach.

	(d)	Subject to the foregoing provisions of this Section 7.2, Spider and KWG shall enter into an amending agreement reflecting the proposed amendments to the Amalgamation and this Agreement and the Amalgamation shall be modified accordingly and Spider and KWG shall each use its respective commercially reasonable efforts to communicate any such modifications to the Spider Shareholders and to ensure that any such modifications are, to the extent required under applicable Laws, presented to the Spider Shareholders at the Spider Meeting.

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7.3	Termination

This Agreement may be terminated at any time prior to the Effective Time:

	(a)	by mutual written agreement between Spider and KWG;

	(b)	subject to Section 5.4:

		(i)	by Spider, if any condition in Section 5.2 is not satisfied or waived in accordance with such section;

		(ii)	by KWG, if any condition in Section 5.3 is not satisfied or waived in accordance with such section; or

		(iii)	if any of the conditions in Section 5.1 for the benefit of the terminating party is not satisfied or waived in accordance with such Section 5.1;

	(c)	by KWG:

		(i)	if the Spider Board fails to recommend to Spider Shareholders that they vote in favour of the Amalgamation and the Spider Resolution and the other transactions contemplated hereby or thereby, except as expressly permitted by Section 6.1(a)(iii);

		(ii)	if the Spider Board shall have made a Change of Spider Recommendation;

		(iii)	if the Spider Board accepts, approves or recommends a Spider Alternative Proposal;

		(iv)	if Spider enters into a letter of intent or definitive written agreement with respect to a Spider Alternative Proposal;

		(v)	except as permitted under Section 6.1(a)(iii), if Spider shall have failed, after being requested by KWG in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated herein as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from KWG; or

		(vi)	if any Spider Common Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid);

	(d)	by KWG if Spider shall have not mailed the Proxy Circular to the Spider Shareholders on or before June 21, 2010; provided that KWG shall have materially fulfilled its obligations under Section 4.2(a);

	(e)	by KWG if Spider shall have failed to hold the Spider Meeting on or before July 14, 2010, unless such failure results from an adjournment of the Spider

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	Meeting for not more than ten (10) Business Days due to its obligation to adjourn the Spider Meeting in the circumstances described in Section 6.2;

(f)	by KWG if there is an intentional breach of the covenants of Spider contained herein by Spider or any of its directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;

(g)	by Spider:

	(i)	if the KWG Board shall have made a Change of KWG Recommendation;

	(ii)	if the KWG Board accepts, approves or recommends a KWG Alternative Proposal;

	(iii)	if KWG enters into a letter of intent or definitive written agreement with respect to a KWG Alternative Proposal;

	(iv)	except as permitted under Section 6.3(a)(iii), if KWG shall have failed, after being requested by Spider in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated herein as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from Spider; or

	(v)	if any KWG Common Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid);

(h)	by Spider if there is an intentional breach of the covenants of KWG contained herein by KWG, any of its Subsidiaries or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;

(i)	by KWG or by Spider if the Amalgamation shall not have been completed by the Completion Deadline; provided however, (i) there is no intentional breach of the covenants of such terminating Party contained herein by such Party, any of its Subsidiaries, if any, or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, before the Completion Deadline, and (ii) if the Amalgamation has not been completed by the Completion Deadline because the Spider Meeting has not been held due to the fault of Spider (the Parties acknowledging that Spider is not at fault in the event that the Spider Meeting has not been held due to an order of a Governmental Entity), then Spider shall not be entitled to terminate this Agreement;

(j)	by KWG in order to enter into a letter of intent or definitive agreement with respect to a KWG Superior Proposal or otherwise accept, approve or recommend a KWG Superior Proposal, subject to compliance with Sections 6.3 and 6.4;

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	(k)	by Spider in order to enter into a letter of intent or definitive agreement with respect to a Spider Superior Proposal or otherwise accept, approve or recommend a Spider Superior Proposal, subject to compliance with Sections 6.1 and 6.2;

	(l)	by KWG, if Spider shall have breached or not performed any material covenant when required to be performed by it under this Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by Spider within the lesser of ten (10) days from the date of delivery of written notice of termination from KWG and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of Spider shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on Spider or have a material adverse effect on the ability of KWG to complete the Amalgamation; or

	(m)	by Spider, if KWG shall have breached or not performed any material covenant when required to be performed by it under this Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by KWG within the lesser of ten (10) days from the date of delivery of written notice of termination from Spider and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of KWG shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on KWG or have a material adverse effect on the ability of Spider to complete the Amalgamation;

provided that any termination by a Party in accordance with the paragraphs above shall be made by such Party delivering written notice thereof to the other Party or parties hereto prior to the earlier of the Effective Date and the Completion Deadline and specifying therein in reasonable detail the matter or matters giving rise to such termination right. In the event of any such termination, subject to the obligations of Spider and KWG contained in Article 6 and this Article 7, including the payment required by Section 7.4 or 7.5, as applicable, each party hereto shall be deemed to have released, remised and forever discharged the other parties hereto in respect of any and all claims arising in respect of this Agreement, except as otherwise provided herein.

7.4	Spider Break Fee

	(a)	If this Agreement is terminated:

		(i)	by KWG pursuant to Section 7.3(j);

		(ii)	by Spider pursuant to Section 7.3(g); or

		(iii)	by Spider pursuant to Section 7.3(m), provided that there is no breach or non-performance by Spider, in any material respect, of its representations, warranties or covenants made in this Agreement which has not been cured,

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		then:

		(X)	in the case of a termination referred to in Section 7.4(a)(i), as a condition to the right of KWG to terminate this Agreement, KWG shall, on or prior to the Termination Date, pay to Spider a cash payment equal to $2,300,000, or

		(Y)	in the case of a termination referred to in Section 7.4(a)(ii), within two (2) Business Days following the Termination Date, KWG shall pay to Spider a cash payment equal to $2,300,000, or

		(Z)	in the case of a termination referred to in Section 7.4(a)(iii), within two (2) Business Days following the Termination Date, KWG shall pay to Spider a cash payment equal to $1,400,000,

		in immediately available Canadian funds. The obligation of KWG to pay the break fee pursuant to this Section 7.4 shall survive the termination of this Agreement.

	(b)	KWG shall not be obligated to make more than one payment pursuant to this Section 7.4. KWG acknowledges that payment by KWG under this Section 7.4 is a payment of liquidated damages which are a genuine pre-estimate of the damages which Spider will suffer or incur as a result of the event giving rise to such damages and the resultant non-completion of the Amalgamation and are not penalties. KWG hereby irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. Upon receipt by Spider of payment under this Section 7.4, Spider shall have no further claim against KWG in respect of the failure to complete the Amalgamation, provided that nothing herein shall preclude Spider from seeking injunctive relief to restrain any breach or threatened breach by KWG of any of its obligations hereunder or otherwise to obtain specific performance without the necessity of posting bond or security in connection therewith.

7.5	KWG Break Fee

	(a)	If this Agreement is terminated:

		(i)	by KWG pursuant to Section 7.3(c);

		(ii)	by Spider pursuant to Section 7.3(k);

		(iii)	by KWG pursuant to Section 7.3(d) or 7.3(e); or

		(iv)	by KWG pursuant to Section 7.3(l), provided that there is no breach or non-performance by KWG, in any material respect, of its representations, warranties or covenants made in this Agreement which has not been cured,

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		then:

		(X)	in the case of a termination referred to in Section 7.5(a)(i), within two (2) Business Days following the Termination Date, Spider shall pay to KWG a cash payment equal to $2,300,000,

		(Y)	in the case of a termination referred to in Section 7.5(a)(ii), as a condition to the right of Spider to terminate this Agreement, Spider shall, on or prior to the Termination Date, pay to KWG a cash payment equal to $2,300,000, or

		(Z)	in the case of a termination referred to in Section 7.5(a)(iii) or 7.5(a)(iv) within two (2) Business Days following the Termination Date, Spider shall pay to KWG a cash payment equal to $1,100,000,

		in immediately available Canadian funds. The obligation of Spider to pay the break fee pursuant to this Section 7.5 shall survive the termination of this Agreement.

(b)	Spider shall not be obligated to make more than one payment pursuant to this Section 7.5. Spider acknowledges that payment by Spider under this Section 7.5 is a payment of liquidated damages which are a genuine pre-estimate of the damages which KWG will suffer or incur as a result of the event giving rise to such damages and the resultant non-completion of the Amalgamation and are not penalties. Spider hereby irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. Upon receipt by KWG of payment under this Section 7.5, KWG shall have no further claim against Spider in respect of the failure to complete the Amalgamation, provided that nothing herein shall preclude KWG from seeking injunctive relief to restrain any breach or threatened breach by Spider of any of its obligations hereunder or otherwise to obtain specific performance without the necessity of posting bond or security in connection therewith.

ARTICLE 8

GENERAL

8.1	Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a party hereto shall be in writing and shall be delivered by hand to the party hereto to which the notice is to be given at the following address or sent by facsimile to the following numbers or to such other address or facsimile number as shall be specified by a party hereto by like notice. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a Business Day or, if not, then the next succeeding Business

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Day) and if sent by facsimile be deemed to have been given and received at the time of receipt (if a Business Day or, if not, then the next succeeding Business Day) unless actually received after 5:00 p.m. (local time) at the point of delivery in which case it shall be deemed to have been given and received on the next Business Day.

The address for service of each of the parties hereto shall be as follows:

	(a)	if to Spider:

		Spider Resources Inc.
		50 Richmond Street East
		Suite 101
		Toronto, Ontario, M5C 1N7

		Attention: Neil Novak, President and Chief Executive Officer
		Fax: (416) 815-1355;

	with a copy (which shall not constitute notice) to:

			McMillan LLP
			Suite 440, 181 Bay St.
			Toronto, Ontario M5J 2T3

			Attention : Carmen Diges
			Fax : (416) 865-7048 ;

	(b)		if to KWG or Newco:

			KWG Resources Inc.
			1000 – 141 Adelaide Street West
			Toronto, Ontario M5H 3L5

			Attention: Frank Smeenk;

			and to:

			600 de Maisonneuve Boulevard West
			Bureau 2750
			Montreal, Quebec, H3A 3J2

			Attention : Luce St. Pierre
			Fax : (514) 866-6193 ;

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	with a copy (which shall not constitute notice) to:

		Macleod Dixon LLP
		79 Wellington Street West
		Suite 2300, P.O. Box 128
		Toronto, Ontario M5K 1H1

		Attention: Marvin Singer and Anthony Shapiro
		Fax: (416) 360-8277.

8.2	Remedies

The parties hereto acknowledge and agree that an award of money damages may be inadequate for any breach of this Agreement by any party hereto or its representatives and advisors and that such breach may cause the non-breaching party hereto irreparable harm. Accordingly, the parties hereto agree that, in the event of any such breach or threatened breach of this Agreement by one of the parties hereto, Spider (if KWG is the breaching party) or KWG (if Spider is the breaching party) will be entitled, without the requirement of posting a bond or other security, to seek equitable relief, including injunctive relief and specific performance. Subject to any other provision hereof including, without limitation, Sections 7.4 and 7.5, such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available hereunder or at law or in equity to each of the parties hereto.

8.3	Expenses

The parties hereto agree that all out-of-pocket expenses incurred in connection with this Agreement and the transactions contemplated hereby, the Spider Meeting, and the preparation and mailing of the Proxy Circular, including legal and accounting fees, printing costs, financial advisor fees and all disbursements by advisors, shall be paid by the party hereto incurring such expense and that nothing in this Agreement shall be construed so as to prevent the payment of such expenses.

The provisions of this Section 8.3 shall survive the termination of this Agreement.

8.4	Time of the Essence

Time shall be of the essence in this Agreement.

8.5	Entire Agreement

This Agreement, together with the agreements and other documents herein or therein referred to, including the Confidentiality Agreement, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the Parties with respect to the subject matter hereof, including the Letter Agreement. There are no representations, warranties, covenants or conditions with respect to the subject matter hereof except as contained herein.

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8.6	Further Assurances

Each party hereto shall, from time to time, and at all times hereafter, at the request of the other of them, but without further consideration, do, or cause to be done, all such other acts and execute and deliver, or cause to be executed and delivered, all such further agreements, transfers, assurances, instruments or documents as shall be reasonably required in order to fully perform and carry out the terms and intent hereof including, without limitation, the Amalgamation.

8.7	Governing Law

This Agreement shall be governed by, and be construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein but the reference to such laws shall not, by conflict of laws rules or otherwise, require the application of the law of any jurisdiction other than the Province of Ontario. The parties hereto irrevocably attorn to the non-exclusive jurisdiction of the courts of the Province of Ontario.

8.8	Execution in Counterparts

This Agreement may be executed in one or more counterparts, each of which shall conclusively be deemed to be an original and all such counterparts collectively shall be conclusively deemed to be one and the same. Delivery of an executed counterpart of the signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party hereto delivering an executed counterpart of the signature page to this Agreement by facsimile to any other party hereto shall thereafter also promptly deliver a manually executed original counterpart of this Agreement to such other party, but the failure to deliver such manually executed original counterpart shall not affect the validity, enforceability or binding effect of this Agreement.

8.9	Waiver

No waiver or release by any party hereto shall be effective unless in writing and executed by the party granting such waiver or release and any waiver or release shall affect only the matter, and the occurrence thereof, specifically identified and shall not extend to any other matter or occurrence. Waivers may only be granted upon compliance with the provisions governing amendments set forth in Section 7.1.

8.10	No Personal Liability

	(a)	No director or officer of Spider shall have any personal liability whatsoever (other than in the case of fraud, negligence or wilful misconduct) to KWG under this Agreement or any other document delivered in connection with this Agreement or the Amalgamation by or on behalf of Spider.

	(b)	No director or officer of KWG shall have any personal liability whatsoever (other than in the case of fraud, negligence or wilful misconduct) to Spider under this Agreement or any other document delivered in connection with this Agreement or the Amalgamation by or on behalf of KWG.

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8.11	Enurement and Assignment

This Agreement shall enure to the benefit of the parties hereto and their respective successors and permitted assigns and shall be binding upon the parties hereto and their respective successors. This Agreement may not be assigned by any party hereto without the prior written consent of the other parties hereto.

8.12	Language

It is the express wish of the parties hereto that this Agreement and any related documentation be drawn up in English. Il est de la volonté expresse de chacune des parties aux présentes que cette convention ainsi que tout document connexe soient rédigés en langue anglaise.

[EXECUTION PAGE FOLLOWS]

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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first above written.

KWG Resources Inc.


Per:	/s/ Frank Smeenk
	Name:	Frank Smeenk
	Title:	President and Chief Executive Officer


Spider Resources Inc.


Per:	/s/ Neil Novak
	Name:	Neil Novak
	Title:	President and Chief Executive Officer


7569076 CANADA INC


Per:	/s/ Frank Smeenk
	Name:	Frank Smeenk
	Title:	Director

SCHEDULE A

DESCRIPTION OF KWG SUBSIDIARIES

KWG Subsidiary	Jurisdiction	Authorized Capital	Outstanding Capital
7207565 Canada Inc.	Canada	unlimited common shares	15,000,001 common shares held by KWG
7569076 Canada Inc.	Canada	unlimited common shares	1 common share held by KWG
Canada Chrome Corporation	Canada	unlimited common shares unlimited preferred shares or other securities without nominal or par value in one or more series as may be determined by the directors of the corporation; the directors may fix the number of preferred shares in each series and may , subject to the limitations set out in the articles, determine the dividends, designations, voting rights, privileges, restrictions and conditions attached to the securities of each series, including without limitation, a right or privilege to exchange a share or securities of a series for a share, securities of another class or series or assets of the corporation	1 common share held by KWG Nil
Debuts Diamonds Inc.	Ontario	unlimited common shares	30,395,400 common shares held by KWG 500,000 common shares held by Gestion Aline Leclerc Inc. 500,000 common shares beneficially held by Mousseau Tremblay

SCHEDULE B

DESCRIPTION OF SPIDER CONVERTIBLE SECURITIES

Spider Options outstanding as of the close of business on June 9, 20101

Type / No. Outstanding	Exercise Price	Expiry Date
2,650,000	$0.10	August 19, 2010
5,385,018	$0.10	February 8, 2011
500,000	$0.10	July 25, 2011
9,900,000	$0.10	October 2, 2013
6,350,000	$0.10	April 21, 2014
4,100,000	$0.10	December 21, 2014

1 Additional Spider Options outstanding pursuant to the Spider Agreements are listed below under “Securities issuable pursuant to the Spider Agreements as of the close of business on June 9, 2010”.

Spider Warrants Outstanding as of the close of business on June 9, 2010

Type / No. Outstanding	Exercise Price	Expiry Date
19,053,660	$0.10	October 11, 2010
2,700,000	$0.10	November 27, 2010
1,200,000	$0.10	December 30, 2010
15,388,332	$0.05 until July 24, 2010, $0.10 thereafter	July 24, 2011
10,388,000	$0.10	December 24, 2011
3,218,333	$0.10	December 30, 2011
29,463,336	$0.10	January 22, 2012

B-1

Spider Unit Compensation Options outstanding as of the close of business on June 9, 2010

Type / No. Outstanding	Exercise Price	Expiry Date
182,1082	$0.06	December 30, 2011

2 Each Spider Compensation Unit Option is exercisable to acquire a Unit comprised of one Spider Common Share and one share purchase warrant. Each full warrant will be exercisable for one Spider Common Share at a price of $0.10 for a period of 24 months from December 30, 2009.

Securities issuable pursuant to the Spider Agreements as of the close of business on June 9, 2010

Type / No. Outstanding	Exercise Price	Expiry Date
Spider Common Shares (in the sole discretion of Spider) to a maximum dollar value of $45,000 Spider Common Shares (in the sole discretion of Spider) to a maximum dollar value of $45,0003	Discounted Market Price as of the date prior to issuance.	May 25, 2011
	Discounted Market Price as of the date prior to issuance.	May 25, 2012

3 Subject to the exercise of the option on May 25, 2011.

Securities outstanding under the Spider Agreements as of the close of business on June 9, 2010

2,000,000 Spider Options	$0.10	December 21, 2014
300,000 Spider Options	$0.15	October 31, 2010

B-2

SCHEDULE C

FORM OF SPIDER RESOLUTION

	BE IT RESOLVED as a special resolution that:

1.	the amalgamation (the “Amalgamation”) of 7569076 Canada Inc. (“Newco”), a wholly-owned subsidiary of KWG Resources Inc. (“KWG”), and Spider Resources Inc. (“Spider”) on the terms and conditions contained in the amalgamation agreement dated as of June 11, 2010, between KWG, Spider and Newco, as amended from time to time (the “Combination Agreement”) is hereby authorized and approved;

2.	the Combination Agreement is hereby approved;

3.	if the Combination Agreement is approved, the directors may at any time elect to redeem all but not less than all of the rights under the Spider Shareholder Rights Plan;

4.	any officer or director of Spider is hereby authorized and directed for and on behalf of Spider to execute and deliver or cause to be executed and delivered, all such documents and instruments as are necessary or desirable to give effect to the Amalgamation in accordance with the Combination Agreement, including without limitation the filing of articles of amalgamation with the Registrar under the Canada Business Corporations Act (“CBCA”), and to perform or cause to be performed all such other acts and things as in such person’s opinion may be necessary or desirable to give full effect to the foregoing resolutions and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or doing of any such act or thing; and

5.	notwithstanding that this resolution has been passed by the shareholders of Spider, the directors of Spider are hereby authorized and empowered (i) to amend the Combination Agreement to the extent permitted by the Combination Agreement, (ii) not to proceed with Amalgamation at any time prior to the issuance of a Certificate of Amalgamation under the CBCA without further approval of the shareholders of Spider, and/or (iii) not to redeem the rights under the Spider Shareholder Rights Plan.

C-1

SCHEDULE D

INITIAL DIRECTORS OF AMALCO

Names	Addresses
Neil Novak	88 Cottonwood Crescent Cambridge, Ontario N1T 2J1
Frank Smeenk	6081 Kirby Road, P.O. Box 283 Kleinburg, Ontario L0J 1C0

KWG RESOURCES INC.

(An exploration stage company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

THREE-MONTH PERIOD ENDED MARCH 31, 2010

KWG Resources Inc.

NOTICE TO READERS OF THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:

The unaudited interim consolidated financial statements of KWG Resources Inc. for the three-month period ended March 31, 2010 have been prepared by management and have not been reviewed by the Company’s external auditors.

(s)MICHAEL S. HARRINGTON
MICHAEL HARRINGTON, Director

(s)THOMAS E. MASTERS
THOMAS E. MASTERS, Chief Financial Officer

Montreal, Quebec

May 31, 2010

KWG Resources Inc.

(An exploration stage company)

Interim Consolidated Balance Sheets (in Canadian dollars)(unaudited)

	As at			As at
	March 31,			December 31,
	2010			2009
Assets

Current assets
Cash and cash equivalents (note 4)		3,712,118			2,056,751
Accounts receivable		790,192			216,486
Temporary investments (note 5)		202,611			134,991
Prepaid expenses		19,945			25,022
		4,724,866			2,433,250
Capital assets (note 6)		60,592			40,101
Mining assets (note 7)		25,767,877			18,256,842
		30,553,335			20,730,193
Liabilities

Current liabilities
Accounts payable and accrued liabilities		7,402,736			1,961,496

Shareholders’ Equity

Share capital (note 8 and 16)		21,287,218			17,039,499
Warrants and compensation options (note 9)		4,941,001			4,031,086
Contributed surplus (note 11)		3,326,255			3,258,431
Deficit		(6,215,690	)		(5,304,514	)
Accumulated other comprehensive loss (note 12)		(188,185	)		(255,805	)
		23,150,599			18,768,697

		30,553,335			20,730,193

The notes on pages 6 to 18 form an integral part of these financial statements.

Approved by the Board of Directors

(s)			(s)
	Director			Director

-3-

KWG Resources Inc.

(An exploration stage company)

Interim Consolidated Statements of Operations and Deficit and Statements of Comprehensive

Income (Loss) for the three-month periods ending March 31, 2010 and 2009 (in Canadian dollars) (unaudited)

	2010			2009
Income
Interest income		978			3,165

Expenses
Administrative		489,879			480,064
Amortization on capital assets		5,635			-
Stock compensation costs (note 10)		67,823			29,466
Unrealized loss on temporary investments (note 5 (a))		-			47,500
Unrealized (gain) loss on foreign exchange		(47,187	)		25,711
		516,150			582,741
Loss for the period before income tax		(515,172	)		(579,576	)
Future income tax recovery		1,022,000			105,000
Income (loss) for the period		506,828			(474,576	)
Deficit - Beginning of the period		(5,304,514	)		(20,877,880	)
Share and warrant issue expenses		(1,418,004	)		(215,026	)
Deficit - End of the period		(6,215,690	)		(21,567,482	)
Loss per share (basic and diluted)		(0.00	)		(0.00	)
Weighted average number of outstanding shares		467,774,654			296,542,986

Interim Consolidated Statements of Comprehensive Income (loss) for the three-month periods ended March 31, 2010 and 2009

	2010		2009

Income (loss) for the period		506,828		(474,576	)
Other Comprehensive income (loss)
- Change in unrealized loss on financial assets available-for-sale		67,620		23,726
Comprehensive income (loss)		574,448		(450,850	)

The notes on pages 6 to 18 form an integral part of these financial statements.

-4-

KWG Resources Inc.

(An exploration stage company)

Interim Consolidated Statements of Cash Flows (in Canadian dollars) (unaudited)

	Three-month period
	ended March 31
	2010			2009
Cash flows from
Operating activities
Income (loss) for the period		506,828			(474,576	)
Adjustments for
Amortization of capital assets		5,635			-
Stock compensation costs (note 10)		67,823			29,466
Unrealized loss on temporary investments		-			47,500
Future income tax recovery		(1,022,000	)		(105,000	)

		(441,714	)		(502,610	)
Financing activities
Share capital issued		4,207,534			2,472,135
Warrants and compensation options issued		950,101			665,091
Share and warrant issue expenses		(396,004	)		(110,026	)

		4,761,631			3,027,200
Investing activities
Additions to mining assets		(7,511,035	)		(275,021	)
Proceeds from disposal of capital assets		400			-
Additions to capital assets		(26,526	)		-
Acquisition of temporary investments		-			(60,000	)
Change in non-cash working capital balances		4,872,611			1,062,114

		(2,664,550	)		727,093

Net change in cash and cash equivalents during the period		1,655,367			3,251,683

Cash and cash equivalents - Beginning of the period		2,056,751			1,528,897

Cash and cash equivalents - End of the period		3,712,118			4,780,580

Change in non-cash working capital items comprises:
Accounts receivable		(573,706	)		7,732
Prepaid expenses		5,077			14,038
Accounts payable and accrued liabilities		5,441,240			(263,081	)
Convertible debenture		-			1,303,425

		4,872,611			1,062,114
Additional information - non-cash transactions

Expired warrants included in contributed surplus		-			136,587
Additions to mining assets included in accounts payable		6,141,641			77,708

The notes on pages 6 to 18 form an integral part of these financial statements.

-5-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

1	Nature of Operations and Going Concern

	KWG Resources Inc. (the “Company”), an exploration stage company, is involved in the exploration of base and precious metals and diamonds and in the development of a transportation link to access the remote areas where these are located. It has interests in properties located in Canada at the exploration stage.

	The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral deposits that are econom ically recoverable. The Company will periodically have to find additional funds to continue its exploration activities, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future.

	Until it is determined that properties contain mineral reserves or resources that can be economically mined, they are classified as exploration properties. The recoverability of deferred exploration expenses is dependent upon: the discovery of economically recoverable reserves and resources; securing and maintaining title and beneficial interest in the properties; the ability to obtain necessary financing to complete exploration, development and construction of processing facilities; obtaining certain government approvals; and attaining profitable production.

	Management will continue to pursue all financing alternatives available to fund its ongoing obligations and exploration activities. There is no assurance that the Company will be successful in these actions. Should the Company not be able to obtain the necessary financing, there would be significant doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

2	Significant accounting policies

	Basis of consolidation

	These interim consolidated financial statements include the accounts of the Company and its whollyowned subsidiaries Debuts Diamonds Inc. (“DDI”), incorporated in Ontario, Canada on October 18, 2007, which owns all the issued and outstanding shares of SMD Mining Corporation (“SMD”) incorporated in Ontario, Canada in January, 2008 and Canada Chrome Corporation (formerly Chrome Canada Corporation) incorporated in Ontario, Canada on July 15, 2009.

	Presentation

	The interim consolidated financial statements of the Company have been prepared by management following the same accounting policies and methods of computation as the annual audited consolidated financial statements of the Company for the year ended December 31, 2009, except as noted hereafter. The disclosure provided hereafter is incremental to that included in the annual audited consolidated financial statements. These interim consolidated financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual audited consolidated financial statements and should be used in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2009. Operating results for the threemonth period ended March 31, 2010 may not necessarily be indicative of the results that may be expected for the full year ending December 31, 2010.

-6-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

	Use of estimates

	The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant areas where management judgment is applied include asset valuations, future income taxes and compensation options. Actual results could differ from those estimates and such differences could be material.

	Cash and cash equivalents

	Cash and cash equivalents includes cash on hand, bank balances and short-term liquid investments with original maturities of three months or less.

	Capital assets

	Capital assets represent assets located at the corporate head office and at exploration site and are recorded at the acquisition cost. Amortization is computed using the straight-line method based on the following number of periods:

Computer equipment	-	2 years
Automobiles	-	3 years
Office furniture	-	5 years

	Foreign currency translation

	Monetary assets and liabilities in foreign currencies are translated into Canadian dollars at year-end exchange rates. Other assets and liabilities as well as items from the Consolidated Statements of Operations and Deficit are translated at the rates of exchange on each transaction date. Gains and losses on translation are included in the Consolidated Statements of Operations and Deficit.

	Future accounting changes

	Business Combinations/Consolidated Financial Statement/Non-Controlling Interest

	In January 2009, the CICA adopted sections 1582, "Business Combinations", 1601, “Consolidated Financial Statements” and 1602, “Non-Controlling Interest” which superseded current sections 1581, “Business Combinations” and 1600, “Consolidated Financial Statements”. These sections will be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Earlier adoption is permitted. If an entity applies these sections before January 1, 2011, it is required to disclose that fact and apply each of the new sections concurrently. These new sections were created to converge Canadian GAAP to International Financial Reporting Standards.

-7-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

3	Capital management

	The capital of the Company consists of items included in the shareholder’s equity of $23,150,599 as of March 31, 2010 ($18,768,697 as of December 31, 2009). In order to maximize its ongoing exploration activities, the Corporation will not pay any dividends in cash.

	While the Company is not exposed to any external capital requirements, neither regulatory nor contractual, funds from the flow-through financing to be spent on the Company’s exploration properties are restricted for this use.

	The Company’s objectives while managing capital are to safeguard its ability to continue its operations as well as its acquisitions and exploration programs. As needed, the Company raises funds through private placements. The Company does not use long term debt financing since it does not generate operating revenues. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geological or economic potential and if it has adequate financial resources to do so.

	There were no changes in the Company’s approach to capital management during the period ended March 31, 2010.

4	Cash and cash equivalents

	As at March 31, 2010, the Company is obliged to incur qualifying exploration expenditures of $4,886,250 (December 31, 2009 $1,433,801) for renunciations made to flow-through share subscribers in 2010.

5	Temporary investments

	The portfolio investments consist of common shares of publicly held companies that are available for sale and are recorded at fair value.

	March 31,			December 31,
	2010			2009
	(unaudited) $			(audited) $
Spider Resources Inc. (“Spider”)
250,000 common shares, quoted market value of $30,000
(2009 − 250,000 common shares, quoted market value of $13,750)		15,000			15,000

Copper Mesa Mining (formerly Ascendant Copper Corporation) (“Mesa”)
353,488 common shares, quoted market value of nil
(2009 - 353,488 common shares quoted market value of $17,674)		97,596			97,596

Strike Minerals Inc. (“Strike”)
3,452,217 common shares, quoted market value of $172,611
(2009 - 3,452,217 common shares quoted market value of $103,567)		278,200			278,200

Cost		390,796			390,796

Unrealized loss		(188,185	)		(255,805	)

Fair value of temporary investments		202,611			134,991

-8-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

6	Capital Assets

	March 31, 2010						December 31, 2009
	(unaudited)						(audited)
	$						$
			Accumulated						Accumulated
	Cost		amortization		Net Value		Cost		amortization		Net Value
Computer equipment		17,634		4,225		13,409		14,400		2,244		12,156
Automobiles		34,526		8,977		25,549		34,000		6,055		27,945
Office furniture		22,000		366		21,634		-		-		-

		74,160		13,568		60,592		48,400		8,299		40,101

7	Mining assets

	March 31,		December
	2010			31, 2009
	(unaudited) $		(audited) $
Cost and deferred exploration expenses		25,767,877		18,256,842

Exploration properties

					Deferred
	Cost				exploration expenses				Total		Total

	March 31,		December		March 31,		December		March 31,		December
	2010			31, 2009		2010		31, 2009		2010		31, 2009
	(unaudited) $		(audited) $		(unaudited) $		(audited) $		(unaudited) $		(audited) $
Canada - Ontario
Spider No. 1 / MacFadyen and
Kyle		264,867		264,867		2,237,084		2,237,084		2,501,951		2,501,951
Spider No. 3 / McFaulds Lake		156,281		156,281		4,033,414		4,033,414		4,189,695		4,189,695
Wawa		64,995		64,995		91,949		91,949		156,944		156,944
Freewest (a)		58,900		58,900		5,288,806		4,701,472		5,347,706		4,760,372
Diagnos		19,065		19,065		78,800		78,800		97,865		97,865
Pele Mountain		109,676		109,676		370,352		369,602		480,028		479,278
Uniform Surround		7,747		7,747		203		203		7,950		7,950
East West option		128,849		128,849		275,397		275,397		404,246		404,246
Railway infrastructure (b)		9,820,388		2,897,437		-		-		9,820,388		2,897,437
Smelter Royalty		2,632,587		2,632,587		-		-		2,632,587		2,632,587
Victor West		119,979		119,979		-		-		119,979		119,979
Other		5,289		5,289		3,249		3,249		8,538		8,538
		13,388,623		6,465,672		12,379,254		11,791,170		25,767,877		18,256,842

(a)

On March 27, 2009, the Company negotiated an amendment to the Freewest Option Agreement whereby the option earn-in calls for a $15 million, three-year commitment. As a result of this amendment, the Company is no longer required to prepare a bankable feasibility study within 18 months, as had been called for in the 2005 agreement. Under the amendment, KWG would have options for up to a $7.5 million commitment over the next three years, of which $2.5 million would be required to be spent before March 31, 2010. During the first quarter of 2010, Freewest was served with a notice that this first commitment had been met.

-9-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

(b)

During the first quarter of 2010, the Company through its wholly-owned subsidiary Canada Chrome Corporation, continued to explore and develop a transportation link to the Company’s properties in Northern Ontario. All costs related to this project have been capitalized.

	March 31,		December 31,
Cost and deferred exploration expenses	2010		2009
Balance - Beginning of year		18,256,842		9,658,935

Acquisition, staking and permits		6,922,951		5,650,003
Exploration expenses
Drilling		361,486		1,211,890
Geology		149,040		848,873
Geophysics		2,715		147,843
Sampling		-		103,876
Consulting		7,056		127,129
Field preparation		-		3,811
Management		7,309		170,439
Line cutting and road		8,209		55,658
Camp expenses		28,104		121,641
Resource studies		1,221		43,809
Drafting		2,846		14,080
Planning		10,635		33,891
Fuel		-		45,955
Survey		9,463		19,009
		588,084		2,947,904
Balance - End of year		25,767,877		18,256,842

8	Share capital

	Authorized
		An unlimited number of common shares
	Issued
		Changes in the Company’s share capital were as follows:

	March 31, 2010					December 31, 2009

	Number of shares		Amount $			Number of shares		Amount $
Balance - Beginning of year		477,863,510		17,039,499			288,134,821		27,835,259
Issued for Canadian exploration expenses (i)		39,090,000		4,886,250			67,489,920		4,086,845
Less: Value of warrants		-		(945,726	)		-		(754,582	)
Issued for working capital requirements (ii)		500,000		35,000			80,334,056		4,825,226
Less: Value of warrants		-		(4,375	)		-		(1,106,944	)
Issued for acquisition of mining assets		-		-			15,000,000		970,000
Less: Value of warrants		-		-			-		(370,000	)
Issued for commission		-		-			2,204,746		143,308
Issued following exercise of warrants and
compensation options		2,363,846		276,570			24,699,967		1,458,649
Less: Value of warrants		-		-			-		(48,262	)
Reduction of share capital issued		-		-			-		(20,000,000	)

Balance - End of year		519,817,356		21,287,218			477,863,510		17,039,499

-10-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

	(i)	On March 31, 2010 the Company completed a non-brokered private placement of 39,090,000 “flow-through” units for total consideration of $4,886,250. These units were issued at $0.125 each and comprised one flow-through common share of the Company and one-half of a common share purchase warrant exercisable at a price of $0.15 per warrant to acquire one common share for a period of two years.

		The fair value of the purchase warrants included in the units was estimated using the Black- Scholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk free interest rate of 0.96% and an expected life of two years. As a result, the fair value of the purchase warrants was estimated at $945,726 after a pro rata allocation of the fair value of the units’ components.

	(ii)	On February 23, 2010 the Company completed a private placement of 500,000 units at $0.07 per unit for a total consideration of $35,000. Each unit was comprised of one common share and one-half of a common share purchase warrant exercisable at a price of $0.10 per warrant to acquire one common share for a period of one year.

		The fair value of the purchase warrants included in the units was estimated using the Black- Scholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk free interest rate of 0.62% and an expected life of one year. As a result, the fair value of the purchase warrants was estimated at $4,375 after a pro rata allocation of the fair value of the units’ components.

9	Warrants and compensation options

	Changes in the Company’s outstanding common share purchase warrants and compensation options were as follows:

	Three month period ended								Year ended
	March 31, 2010								December 31, 2009
	Warrants			Compensation options		Amount $			Warrants			Compensation options			Amount $
Issued
Balance - Beginning of year		159,709,798			1,102,373		4,031,086			94,005,808			9,060,157			1,637,809
Issued as part of private placement of units
(note 9(i)(ii))		19,795,000			-		950,101			84,030,583			-			1,861,526
Issued for acquisition of mining assets		-			-		-			15,000,000			-			370,000
Agent’s compensation options		-			-		-			2,529,967			1,102,373			18,740
Exercised		(2,363,846	)		-		(40,186	)		(18,475,000	)		(4,377,467	)		(137,439	)
Extension of warrants maturity date		-			-		-			-			-			660,000
Expired		-			-		-			(17,381,560	)		(4,682,690	)		(379,550	)

Balance - End of year		177,140,952			1,102,373		4,941,001			159,709,798			1,102,373			4,031,086

Outstanding common share purchase warrants and compensation options entitle their holders to subscribe for an equivalent number of common shares.

-11-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

A summary of the Company’s outstanding warrants and compensation options as at March 31, 2010 is presented below:

Number of warrants		Compensation options		Exercise price $		Expiry date

	2,000,000		-		0.10	August 2010
	17,994,960		-		0.10	November 2010
	5,750,000		1,102,373		0.10	December 2010
	250,000		-		0.10	February 2011
	2,453,044		-		0.065	October 2011
	19,545,000		-		0.15	March 2012
	200,000		-		0.10	May 2012
	1,300,000		-		0.10	June 2012
	1,000,000		-		0.10	July 2012
	6,600,000		-		0.10	September 2012
	24,190,000		-		0.10	October 2012
	9,375,000		-		0.12	October 2012
	4,135,000		-		0.15	December 2012
	7,062,325		-		0.18	December 2012
	22,224,784		-	0.05/0.10 U.S.		March 2014
	9,310,839		-	0.05/0.10 U.S.		April 2014
	15,000,000		-		0.10	July 2014
	28,750,000		-		0.05/0.10	August 2014

	177,140,952		1,102,373

10	Stock option plan

	During the three-month period ended March 31, 2010 there was no change in the Company’s number of stock options outstanding (note 16).

	The following table summarizes information about options outstanding and exercisable as at March 31, 2010:

				Outstanding		Exercisable
				options		options
Exercise price $		Number of options		Average contractual life (in years)

	0.10		23,591,780		2.15		19,442,718
	0.12		5,940,500		2.68		5,940,500
	0.15		500,000		2.81		500,000

			30,032,280				25,883,218

Total stock compensation costs for the period ended March 31, 2010 amounted to $67,823 (2009 -$29,466).

-12-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

11	Contributed surplus

	March 31,		December 31,
	2010 $		2009 $
Balance - Beginning of year		3,258,431		2,626,615

Stock compensation costs (note 11)		67,824		252,266
Expiry of warrants		-		379,550

Balance - End of year		3,326,255		3,258,431

12	Accumulated other comprehensive loss

	March 31,			December
	2010				31, 2009
	(unaudited) $			(audited) $

Accumulated other comprehensive loss - beginning of year		(255,805	)		(225,574	)

Latent gain/(loss) on temporary investments available for sale		67,620			(30,231	)

Accumulated other comprehensive loss - end of year		(188,185	)		(255,805	)

	Three month			Year ended
	period ended			December 31,
	March 31, 2010 $			2009 $

Latent loss on temporary investments - beginning of year		(255,805	)		(225,574	)

Unrealized gain (loss) for the year on Spider investment		16,250			6,250
Unrealized gain (loss) for the year on Mesa investment		(17,674	)		5,302
Unrealized gain (loss) for the year on Strike investment		69,044			(41,783	)

Latent loss on temporary investments - end of year		(188,185	)		(255,805	)

With respect to the Company’s investments, the latent loss on temporary investments available for sale adjustments represent the unrealized gain or loss on the Company’s net investments (note 5).

-13-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

13	Related party transactions

	Related party transactions occurred in the normal course of business and were recorded at the exchange value, reflecting the consideration determined and agreed to by the parties. In the first quarter of 2010, officers and companies controlled by officers charged consulting fees totalling $61,438 (March 31, 2009 - $70,952) of which $35,761 remained payable at March 31, 2010 (March 31, 2009 - $31,898) and directors of the Company and a company controlled by a director of the Company charged $30,728 (March 31, 2009 - $58,300) for professional consulting services and directors fees of which $nil remained payable at March 31, 2010 (March 31, 2009 - $nil).

14	Financial instruments

	The Company is exposed to various financial risks resulting from both its operations and its investments activities. The Company’s management manages financial risks. The Company does not enter in financial instrument agreements including derivative financial instruments for speculative purposes. The Company’s main financial risk exposure and its financial risk management policies are as follows:

	Interest rate risk

	Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in the market interest rates.

	Credit Risk

	It is management’s opinion that the Company is not exposed to significant credit risks.

	Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is subject to concentrations of credit risk through cash and accounts receivable. The Company reduces its credit risk by maintaining part of its cash in financial instruments guaranteed by and held with a Canadian chartered bank.

	Foreign Exchange Risk

	Foreign exchange risk is the potential adverse impact on earnings and economic value due to movements and volatilities in foreign exchange rates. The Company maintains cash denominated in US dollars and it also engages suppliers whose payments are required to be made in US dollars. As a result, the Company is exposed to US dollar fluctuations. As at March 31, 2010 US dollar denominated balances included cash of US$398,163 (US$30,925 in 2009) and accounts payable of US$3,098,983 (US$272,720 in 2009).

	Liquidity Risk

	Liquidity risk is the risk that the Company will not be able to meet the obligations associated with its financial liabilities. As at March 31, 2010, the Company did not have enough funds available to satisfy its obligations under accounts payable and accrued liabilities. However, this was rectified through the issuance of new equity in April 2010 (note 16).

	In the past few years, the Company has financed its liquidity needs primarily by issuing equity securities. As the Company is currently incurring operating losses, additional capital will be required to continue exploration activities on the properties (note 1).

-14-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

	Fair Value

	Fair value estimates are made at the balance sheet date, based on relevant market information and other information about financial instruments.

	As at both March 31, 2010 and December 31, 2009, all financial instruments (cash, accounts receivable, and accounts payable and accrued liabilities) have fair values which approximate their carrying values due to the relatively short period to maturity of the instruments. For temporary investments refer to note 6.

15	Commitments

	Pursuant to flow-through financing agreements closed during the period ended March 31, 2010, the Company must incur $4,886,250 in exploration expenses by December 31, 2010.

16	Subsequent events

	(i)	On April 16, 2010 the Company closed the second tranche of a non-brokered private placement through the sale of 22,467,308 units at $0.125 each for gross proceeds of $2,808,414. Finder’s fees totaling $224,673 were paid. All securities issued pursuant to this private placement have a hold period of four months ending August 17, 2010. Directors of the Company subscribed for $500,000 of these units.

	(ii)	On April 7, 2010 the Company was notified by Cliffs Greene B. V. (“Cliffs”) that it wished to exercise its pre-emptive right to participate in the private placement announced by the Company on March 19, 2010 and it will subscribe for such number of units that it holds a 19.9% interest in the Company on a fully-diluted basis following completion of the Private Placement and the exercise of warrants referred to below. On April 21, 2010 Cliffs purchased the final tranche of the private placement which consisted of 26,382,390 non flow-through units at $0.125 each for gross proceeds of $3,297,799. In the result, the private placement raised a total of approximately $11 million.

		In addition, Cliffs provided notice that it is exercising warrants previously issued to it to acquire 5,016,769 common shares of the Company for gross proceeds of US$250,839.45. These warrants were issued to Cliffs to enable it to avoid dilution of its interest in the Company, and became exercisable upon the exercise of warrants held by third parties to acquire 25,083,845 common shares of the Company.

	(iii)	On May 19, 2010 the shareholders of the Company approved the conversion of the Company’s Employee Incentive Stock Option Plan into a rolling option plan pursuant to which a maximum of 10% of the number of issued and outstanding shares of the Company from time to time may be reserved and allocated for the granting of stock options.

	(iv)	On May 21, 2010 the Board of Directors awarded 26,045,000 options to purchase treasury shares at $0.125 each under the provisions of the Company’s revised Employee Incentive Stock Option Plan. Of the total awards 8,345,000 were allocated to employees and consultants of the Company and of its subsidiaries, 7,500,000 to directors, 4,500,000 to directors who are also officers, and 5,700,000 to officers of the Company and of its subsidiaries. The options vest over a period of 18 months and are exercisable over a period of five years.

-15-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

(v)	On May 25, 2010 the Company announced that the board of directors of the Corporation approved the adoption of a shareholder rights plan, effective May 25, 2010. The objective of the rights plan is to ensure, to the extent possible, that all shareholders of the Corporation are treated equally and fairly in connection with any initiative to acquire control of the Corporation. The rights plan is not intended to and will not prevent a take-over of the Corporation. The purpose of the rights plan is to encourage a potential bidder to make a "Permitted Bid", having terms and conditions designed to meet the objectives of the rights plan, or to negotiate the terms of an offer with the board of directors of the Corporation. A Permitted Bid is a take-over bid that is made to all holders of voting shares of the Corporation (other than the bidder) for all of the voting shares held by them, by way of a take-over bid circular prepared in compliance with applicable securities laws, that remains open for acceptance by shareholders of the Corporation for 60 days (or such shorter period of time as may be approved by the board of directors of the Corporation from time to time), and that satisfies certain other conditions, including the condition that a take-over bid made by an offeror who possesses confidential information concerning the Corporation will not constitute a Permitted Bid unless the offeror has entered into a confidentiality agreement containing a standstill provision with the Corporation within the three months that precedes the commencement of the bid. The rights plan must be confirmed by shareholders within six months of its effective date. The listing of the rights is subject to acceptance by the TSX Venture Exchange.

(v)	On May 25, 2010 the Company announced that it had entered into a binding letter agreement (“Letter Agreement”) with Spider Resources Inc. which sets out the principal terms upon which it is proposed that the two corporations will complete a business combination (the “Merger”), at the conclusion of which the shareholders of each corporation will hold 50% of the outstanding shares of the ongoing public corporation. The combined company will hold a current interest of 53% in the Big Daddy deposit, with the option to earn a further 7% to achieve a 60% interest in the project. It is anticipated that the ongoing public corporation will continue to be named “KWG Resources Inc.” for a period of time after the Merger and will continue to be listed on the TSX Venture Exchange (“TSXV”) and on the Canadian National Stock Exchange (the “CNSX”). Following the Merger, it is proposed that the name of the ongoing public company will be changed to “Spider-KWG Resources Inc.” subject to shareholder and regulatory approvals.

	Rationale for the Merger

	KWG and Spider have decided to combine, as the logical next step of the continued exploration and development of their jointly held mineral projects in Northern Ontario. The Merger has been initiated in order to combine the companies’ respective assets and experienced management teams, facilitate future financings and rationalize operations, all with a view to enhancing shareholder value. In particular, the Merger will result in the combined company having a majority interest in the Big Daddy Deposit with the ongoing right to operate the continued exploration, development and mining activities thereon.

	Highlights of the Merger

	It is anticipated that the Merger will be effected by way of a three cornered amalgamation under the Canada Business Corporations Act (the “CBCA”), pursuant to which Spider (a corporation formed under the CBCA) will amalgamate with a newly-incorporated, wholly-owned CBCA formed subsidiary of KWG, to become a wholly-owned subsidiary of KWG. Prior to the completion of the Merger, KWG will transfer its interests in the railway right of way, in its 1% net smelter returns royalty covering the Big Daddy deposit, the Black Thor Deposit and the Black Label Deposit

-16-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

	granted by Freewest Resources Canada Inc., and cash in an amount to be agreed upon between KWG and Spider to KWG’s wholly-owned subsidiary, Debuts Diamonds Inc. (“Debuts”), in exchange for Debut’s interest in various diamond exploration projects and a number of common shares of Debuts to be specified, and will distribute all of the outstanding common shares of Debuts to the shareholders of record of KWG.

	Under the terms of the Merger:

(a)

all of the common shares of Spider (the “Spider Shares”) outstanding will be exchanged for common shares of KWG (the “KWG Shares”) at the ratio of one (1) Spider Share for that number of KWG Shares equal to:

		(i)	the number of outstanding KWG Shares, divided by

		(ii)	the number of outstanding Spider Shares,

		in each case calculated as at the close of business on the date immediately preceding the effective date of the Merger (the “Exchange Ratio”);

	(b)	each of the outstanding warrants to purchase one Spider Share (“Spider Warrant”) will, subject to regulatory approval, be exchanged for a warrant of KWG (“KWG Warrant”) exercisable to acquire that number of KWG Shares equal to the Exchange Ratio. All other terms of such KWG Warrant, including the exercise price and the expiry date thereof, shall be the same as the Spider Warrant;

	(c)	each of the outstanding options (whether or not vested) to acquire one Spider Share will, subject to regulatory approval, be exchanged for an option of KWG exercisable to acquire that number of KWG Shares equal to the Exchange Ratio at an exercise price per KWG Share and on other terms to be agreed upon and included in the definitive agreement in respect of the Merger (the “Definitive Agreement”);

	(d)	each of the outstanding compensation options of Spider (each, a “Spider Unit Compensation Option”) to acquire a unit of Spider (each, a “Spider Unit”), each Spider Unit consisting of one Spider Share and one common share purchase warrant of Spider, will, subject to regulatory approval, be exchanged for one compensation option of KWG (each, a “KWG Unit Compensation Option”) exercisable to acquire a number of units of KWG equal to the Exchange Ratio (each, a “KWG Unit”), each KWG Unit consisting of one KWG Share and one common share purchase warrant of KWG. All other terms of the KWG Unit Compensation Options, including the expiry dates thereof, shall be the same as the Spider Unit Compensation Options for which they are exchanged and all terms of the common share purchase warrants of KWG comprising part of the KWG Unit, including the exercise price and expiry date thereof, shall be the same as the common share purchase warrant of Spider comprising part of the Spider Unit; and

	(e)	KWG shall continue with its listing on the TSXV and the CNSX.

	KWG and Spider will cooperate in structuring the Merger, which may vary from the foregoing structure on the basis of tax, securities, corporate law and other advice in order to ensure the most efficient structure for each of the parties and their respective security holders. Completion of the Merger is subject to a number of conditions, including, but not limited to, confirmatory due

-17-

KWG Resources Inc.

(An exploration stage company)

Notes to Interim Consolidated Financial Statements (in Canadian dollars)

March 31, 2010 and 2009 (unaudited)

	diligence, the negotiation and execution of the Definitive Agreement, the receipt of all required regulatory approvals, including the approval of the TSXV, and approval of the shareholders of Spider.

	The Merger will be submitted to the shareholders of Spider (the “Spider Shareholders”) for consideration and approval at a special meeting to be convened by Spider as soon as possible following the completion, to the satisfaction of Spider and KWG, as applicable, of their due diligence investigations and execution of definitive documentation.

	Each party will pay its own costs and expenses (including all legal, accounting and financial advisory fees and expenses) in connection with the Merger, including expenses related to the preparation, execution and delivery of the Letter Agreement, the Definitive Agreement and such other required documents.

	In addition, the parties have agreed that each party will pay the other a break fee of CDN$2.3 million if, among other things, the Merger is not completed as a result of such party completing an alternative transaction, including but not limited to a merger, amalgamation, share exchange, business combination, take-over bid, sale or other disposition of material assets, recapitalization, reorganization, liquidation, sale or issuance of a material number of treasury securities (except upon the due exercise of convertible securities outstanding on the date of this news release) or rights or interests therein or thereto or rights or options to acquire any material number of treasury securities or any type of similar transaction involving it or any of its subsidiaries other than with the other party to the Letter Agreement, the board of directors of such party withdraws or modifies, in a manner materially adverse to the other party to the Letter Agreement, its approval or recommendation of the Merger or otherwise fails to make such approval or recommendation, such party enters into a letter of intent or definitive written agreement with respect to a Superior Proposal (as defined in the Letter Agreement), or if such party is subject to a take-over bid initiated by a third party. This break fee will also be payable by Spider to KWG if KWG terminates the Letter Agreement following the failure by Spider to mail a proxy circular and related documents in respect of the Merger to its shareholder on or before June 21, 2010. The parties have further agreed that, in certain other circumstances, Spider will pay a break fee to KWG of CDN$1.1 million or, KWG will pay a break fee to Spider of CDN$1.4 million.

	Proposed Take-Over Bids for KWG and/or Spider by Cliffs Natural Resources Inc.

	On May 24, 2010, Cliffs Natural Resources Inc. (“Cliffs”) announced that it intends to make take-over bids for all of the issued and outstanding common shares (not already owned by Cliffs or its affiliates) of KWG and/or Spider for cash consideration of $0.13 per share. Cliffs advised that neither bid would be conditional upon the completion of the other. The board of directors of each of Spider and KWG has formed an independent special committee to consider the bid by Cliffs.

-18-

KWG RESOURCES INC.

(An exploration stage company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

	PricewaterhouseCoopers LLP Chartered Accountants
	PO Box 82
	Royal Trust Tower, Suite 3000 Toronto Dominion Centre Toronto, Ontario
	Canada M5K 1G8
	Telephone +1 416 863 1133 Facsimile +1 416 365 8215

April 26, 2010

Auditors’ Report

To the Shareholders and Directors of

KWG Resources Inc.

We have audited the consolidated balance sheets of KWG Resources Inc. (the Company) as at December 31, 2009 and 2008 and the consolidated statements of operations and deficit, comprehensive loss, shareholders’ equity and cash flow for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

(Signed) “PricewaterhouseCoopers LLP”

Chartered Accountants, Licensed Public Accountants

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l. and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

-1-

KWG Resources Inc.

(An exploration stage company)

Consolidated Balance Sheets

As at December 31, 2009 and 2008

	2009			2008
		$			$
Assets

Current assets
Cash (note 5)		2,056,751			1,528,897
Accounts receivable		216,486			96,059
Temporary investments (note 6)		134,991			152,722
Prepaid expenses		25,022			23,062
		2,433,250			1,800,740

Capital assets (note 7)		40,101			-
Mining assets (note 8)		18,256,842			9,701,315
		20,730,193			11,502,055
Liabilities

Current liabilities
Accounts payable and accrued liabilities		1,961,496			505,826

Shareholders’ Equity

Share capital (note 9)		17,039,499			27,835,259

Warrants and compensation options (note 10)		4,031,086			1,637,809

Contributed surplus (note 12)		3,258,431			2,626,615

Deficit		(5,304,514	)		(20,877,880	)

Accumulated other comprehensive loss (note 13)		(255,805	)		(225,574	)
		18,768,697			10,996,229

		20,730,193			11,502,055

Nature of Operations and Going Concern (note 1)

Approved by the Board of Directors

(s) Douglas M. Flett			(s) Michael S. Harrington
	Director			Director

-2-

KWG Resources Inc.

(An exploration stage company)

Consolidated Statements of Operations and Deficit

For the years ended December 31, 2009 and 2008

	2009			2008
		$			$

Income
Gain on disposal of royalty (note 8(j))		-			117,751
Interest income		20,005			93,036
		20,005			210,787
Expenses
Administrative		2,708,367			1,030,819
Amortization		8,300			-
Part XII.6 taxes		-			86,000
Stock compensation costs (note 11)		252,266			448,037
Warrants extension cost (note 10)		660,000			-
Write-down and write-off of mining assets (note 8)		-			10,829,266
Unrealized loss on temporary investment (note 6(b))		47,500			88,566
Loss on exchange		443,898			-
		4,120,331			12,482,688
Loss before income tax		(4,100,326	)		(12,271,901	)

Future income tax recovery (note 14)		105,000			1,140,000

Loss for the year		(3,995,326	)		(11,131,901	)

Deficit - Beginning of year		(20,877,880	)		(8,546,676	)

Share and warrant issue expenses		(431,308	)		(1,199,303	)
Reduction of deficit		20,000,000			-

Deficit - End of year		(5,304,514	)		(20,877,880	)

Loss per share		(0.01	)		(0.04	)

Weighted average number outstanding shares
		364,914,105			265,482,144


Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2009 and 2008
		2009			2008
		$			$

Loss for the year		(3,995,326	)		(11,131,901	)
Other Comprehensive loss
- Change in unrealized loss on financial assets
available-for-sale		(47,085	)		(189,210	)

Comprehensive Loss		(4,042,411	)		(11,321,111	)

-3-

KWG Resources Inc.

(An exploration stage company)

Consolidated Statements of Cash Flows

For the years ended December 31, 2009 and 2008

	2009			2008
Cash flows from		$			$

Operating activities
Loss for the year		(3,995,326	)		(11,131,901	)
Adjustments for
Amortization of capital assets		8,300			-
Stock compensation costs (note 11)		252,266			448,037
Write-down and write-off of mining assets		-			10,829,266
Write-off of accounts receivable		-			2,007
Unrealized loss on temporary investment (note 6(b))		47,500			88,566
Warrants extension cost		660,000			-
Future income tax recovery (note 14)		(105,000	)		(1,140,000	)
		(3,132,260	)		(904,025	)

Change in non-cash working capital items		1,333,283			354,619

		(1,798,977	)		(549,406	)

Financing activities
Share capital issued		8,326,414			537,720
Warrants and compensation options issued		1,861,526			101,020
Share and warrant issue expenses		(164,259	)		(46,370	)
		10,023,681			592,370

Investing activities
Additions to mining assets		(7,585,527	)		(3,631,951	)
Acquisition of temporary investments (note 6)		(60,000	)		(354,266	)
Acquisition of capital assets		(48,401	)		-

		(7,693,928	)		(3,986,217	)

Effect of exchange rate changes on cash		(2,922	)		-

Net change in cash and cash equivalents during the year		527,854			(3,943,253	)

Cash and cash equivalents - Beginning of year		1,528,897			5,472,150

Cash and cash equivalents - End of year		2,056,751			1,528,897


Change in non-cash working capital items comprises:
Accounts receivable		(120,427	)		(37,531	)
Prepaid expenses		(1,960	)		(15,756	)
Accounts payable and accrued liabilities		1,455,670			407,906

		1,333,283			354,619
Additional information - non-cash transactions

Issuance of shares/warrants for mining assets		970,000			68,000
Issuance of agent compensation options		18,740			12,933
Expired warrants included in contributed surplus		378,998			182,070
Additions to mining assets included in accounts payable		1,502,796			77,708

-4-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

1	Nature of Operations and Going Concern

	KWG Resources Inc. (the “Company”), an exploration stage company, is involved in the exploration of base and precious metals and diamonds and in the development of a transportation link to access the remote areas where these are located. It has interests in properties located in Canada at the exploration stage.

	These financial statements have been prepared using Canadian generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due for the foreseeable future.

	The Company is in the process of exploring its mineral property interests and has not yet determined whether its mineral property interests contain mineral deposits that are economically recoverable. The Company will periodically have to find additional funds to continue its exploration activities, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future.

	Until it is determined that properties contain mineral reserves or resources that can be economically mined, they are classified as exploration properties. The recoverability of deferred exploration expenses is dependent upon: the discovery of economically recoverable reserves and resources; securing and maintaining title and beneficial interest in the properties; the ability to obtain necessary financing to complete exploration, development and construction of processing facilities; obtaining certain government approvals; and attaining profitable production.

	For the year ended December 31, 2009, the Company incurred a loss of $3,995,326 ($11,131,901 for the year ended December 31, 2008). Cash as at December 31, 2009 amounted to $2,056,751 ($1,528,897 as at December 31, 2008) including funds reserved for exploration of $1,433,801 ($369,808 as at December 31, 2008). Accounts payable and accrued liabilities as at December 31, 2009 amounted to $1,961,496 ($505,826 as at December 31, 2008). In addition to ongoing working capital requirements, the Company must secure on an ongoing basis sufficient funds for its existing commitments for exploration and general and administration costs.

	Management will continue to pursue all financing alternatives available to fund its ongoing obligations and exploration activities. There is no assurance that the Company will be successful in these actions. Should the Company not be able to obtain the necessary financing, there would be significant doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.


2	Significant accounting policies

	Basis of consolidation

	These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Debuts Diamonds Inc. (“DDI”), incorporated in Ontario, Canada on October 18, 2007, which owns all the issued and outstanding shares of SMD Mining Corporation (“SMD”) incorporated in Ontario, Canada in January, 2008 and Canada Chrome Corporation (formerly Chrome Canada Corporation) incorporated in Ontario, Canada on July 15, 2009.

-5-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	Use of estimates
	The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Significant areas where management judgment is applied include asset valuations, future income taxes and compensation options. Actual results could differ from those estimates and such differences could be material.

	Cash and cash equivalents
	Cash and cash equivalents includes cash on hand, bank balances and short-term liquid investments with original maturities of three months or less.

	Capital assets
	Capital assets represent assets located at the corporate head office and at exploration site and are recorded at the acquisition cost. Amortization is computed using the straight-line method based on the following number of periods:

	Computer & office equipment	-	2 years
	Automobiles	-	3 years

	Mining assets
	Exploration properties include rights in mining properties and deferred exploration expenses.
	Exploration costs are deferred until the economic viability of the project has been established, at which time costs are added to mining properties. Costs are written off when properties are abandoned or when cost recovery is uncertain. Management has defined uncertainty as either there being no financial resources available from the Company or its joint venture partners for development of a mining property over a three-year period or results from exploration work not warranting further investment.
	Proceeds from the sale of exploration properties are applied in reduction of related carrying costs and any excess is recorded as a gain in the Consolidated Statements of Operations and Deficit. In the case of a partial sale, if carrying costs exceed the proceeds, only the losses are recorded.

	Impairment of long-lived assets
	Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not be recoverable, as identified by comparing their net book value to the estimated undiscounted future cash flows generated by their use and eventual disposal. Impairment is measured as the excess of the carrying value over the fair value, determined principally by discounting the estimated net future cash flows expected to be generated from the use and eventual disposal of the related asset. In the event that the Company has insufficient information about its exploration properties to estimate future cash flows to test the recoverability of the capitalized costs, the Company will test for impairment by comparing the fair value to the carrying amount, without first performing a test for recoverability.

-6-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	Flow-through shares
	The Company may finance a portion of its exploration and development activities through the issuance of flow-through common shares. Under the terms of the flow-through share agreements, the resource expenditure deductions for income tax purposes are renounced to investors in accordance with the appropriate income tax legislation. The Company provides for the future effect on income taxes related to flow through shares as a charge to deficit and future income tax liability when the renunciation forms are filed with the tax authorities.

	Stock option plan
	The Company applies the fair value method to account for options granted to its employees, officers, directors and consultants. Any consideration paid on exercise of stock options is credited to share capital. The stock compensation cost is stated as per the periods of option acquisition. The contributed surplus resulting from the stock compensation is transferred to share capital when the options are exercised.

	Foreign currency translation
	Monetary assets and liabilities in foreign currencies are translated into Canadian dollars at year-end exchange rates. Other assets and liabilities as well as items from the Consolidated Statements of Operations and Deficit are translated at the rates of exchange on each transaction date. Gains and losses on translation are included in the Consolidated Statements of Operations and Deficit.

	Income taxes
	The Company provides for income taxes using the liability method of tax allocation. Under this method, future income tax assets and liabilities are determined based on deductible or taxable temporary differences between the accounting values and tax values of assets and liabilities using substantively enacted or enacted income tax rates expected to be in effect for the year in which the differences are expected to reverse.
	The Company establishes a valuation allowance against future income tax assets if, based upon available information, it is more likely than not that some or all of the income tax assets will not be realized.

	Share and warrant issue expenses
	Share and warrant issue expenses are recorded as an increase in deficit in the year in which they are incurred, with the exception of expenses related to financings not closed at the end of the year, which are deferred.

	Loss per share
	Loss per share is calculated using the weighted average number of shares outstanding during the year.

-7-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	Related Party Transactions
	Related party transactions occurred in the normal course of business and were recorded at the exchange value, reflecting the consideration determined and agreed to by the parties.

	Financial instruments - Recognition and measurement
	All financial instruments are required to be measured at fair value on initial recognition, except for certain related party transactions. Measurement in subsequent periods depends on whether the financial instrument has been classified as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or other liabilities.

	§	Financial assets and liabilities classified as held-for-trading are required to be measured at fair value, with changes in fair value recognized in net earnings.
	§	Financial assets classified as held-to-maturity, loans and receivables and financial liabilities (other than those held-for-trading) are required to be measured at amortized cost using the effective interest method of amortization.
	§	Available-for-sale financial assets are required to be measured at fair value, with unrealized gains and losses recognized in Other Comprehensive Loss. Investments in equity instruments classified as available-for-sale that do not have a quoted market price in an active market should be measured at cost.

Fair value measurement of financial assets and liabilities recognized on the balance sheet are categorized into levels within a fair value hierarchy based on the nature of valuation inputs. The three levels of the fair value hierarchy are:

	Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
	Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
	Level 3 - Inputs that are not based on observable market data.

The Company has adopted the following classification:

	§	Cash and cash equivalents are classified as "Financial Assets Held for Trading".
	§	Receivables are classified as “Loans and Receivables”
	§	Temporary investments are classified as “Available-for-Sale”
	§	Accounts payables and accrued liabilities are classified as "Other Financial Liabilities", all of which are measured at amortized cost.

3	Changes in Accounting Policies
	Effective January 1, 2009, the Company adopted the following guidance of the Canadian Institute of Chartered Accountants’ Handbook (“CICA”) Handbook.
	CICA Handbook Section 3031, "Inventories", relates to the accounting for inventories and revises and enhances the requirements for assigning costs to and disclosure of inventories. The Company records all major spare parts inventory in Property, plant and equipment in accordance with CICA Handbook Section 3031. There was no impact on the financial statements as a result of adoption of this standard.

-8-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	CICA Handbook Sections 3862, "Financial Instruments - Disclosures", and CICA Handbook Section 3863, "Financial Instruments - Presentation", replaces CICA Handbook Section 3861, "Financial Instruments - Disclosure and Presentation". During 2009, CICA Handbook Section 3862, Financial Instruments - Disclosures ("Section 3862"), was amended to require disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurements.
	Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives and provides guidance for the classification of related interest, dividends, losses and gains, and circumstances in which financial assets and financial liabilities are offset.
	In March 2009, the CICA approved EIC 174, "Mining Exploration Costs". This guidance clarified when exploration costs related to mineral properties may be capitalized and, if exploration costs are initially capitalized, when should impairment be assessed to determine whether a write-down is required. The guidance further clarified what conditions indicate impairment. This guidance is applicable to financial statements filed after March 27, 2009. The Company has considered this guidance in assessing the value of its mineral properties and has determined that there is no impairment in value at December 31, 2009.

	Future accounting changes
	Business Combinations/Consolidated Financial Statement/Non-Controlling Interest
	In January 2009, the CICA adopted sections 1582, "Business Combinations", 1601, “Consolidated Financial Statements” and 1602, “Non-Controlling Interest” which superseded current sections 1581, “Business Combinations” and 1600, “Consolidated Financial Statements”. These sections will be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Earlier adoption is permitted. If an entity applies these sections before January 1, 2011, it is required to disclose that fact and apply each of the new sections concurrently. These new sections were created to converge Canadian GAAP to International Financial Reporting Standards.
	Goodwill and Intangible Assets - Section 3064
	In February 2008, the Canadian Institute of Chartered Accountants ("CICA") issued Section 3064 "Goodwill and Intangible Assets" which replaces "Goodwill and Other Intangible Assets." This new standard provides guidance on the recognition, measurement, presentation and disclosure of goodwill and intangible assets. It ensures that intangible assets meet the definition of an asset, and eliminates the "matching" principle, whereby certain costs were being deferred and expensed to match with revenue earned. Concurrent with the introduction of this standard, the CICA withdrew EIC 27, Revenues and Expenses during the pre-operating period. This change has no impact on the Company since it does not apply to extractive industries.

4	Capital management
	The capital of the Company consists of items included in the shareholder’s equity of $18,768,697 as of December 31, 2009 ($10,996,229 as of December 31, 2008). In order to maximize its ongoing exploration activities, the Corporation will not pay any dividends in cash.
	While the Company is not exposed to any external capital requirements, neither regulatory nor contractual, funds from the flow-through financing to be spent on the Company’s exploration properties are restricted for this use.

-9-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	The Company’s objectives while managing capital are to safeguard its ability to continue its operations as well as its acquisitions and exploration programs. As needed, the Company raises funds through private placements. The Company does not use long term debt financing since it does not generate operating revenues. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geological or economic potential and if it has adequate financial resources to do so.
	There were no changes in the Company’s approach to capital management during the year ended December 31, 2009.

5	Cash
	As at December 31, 2009, cash includes an amount of $1,433,801 (2008 - $369,808) reserved for new exploration activities to be conducted in Canada before December 31, 2010.

6	Temporary investments
	The portfolio investments consist of common shares of publicly held companies that are available for sale and are recorded at fair value.

	2009			2008
		$			$
Spider Resources Inc. (“Spider”)
250,000 common shares, quoted market value of $13,750
(2008 − 250,000 common shares, quoted market value of $7,500)		15,000			15,000
Copper Mesa Mining (formerly Ascendant Copper Corporation) (“Mesa”)
353,488 common shares, quoted market value of $17,674 (a)
(2008 - 353,488 common shares quoted market value of $12,372)(a)		97,596			97,596
Strike Minerals Inc. (“Strike”)
3,452,217 common shares, quoted market value of $103,567
(2008 - 2,952,217 common shares quoted market value of $132,850) (b)		278,200			265,700
Cost		390,796			378,296
Unrealized loss		(255,805	)		(225,574	)
Fair value of temporary investments		134,991			152,722

	(a)	On March 27, 2008, Mesa completed the acquisition of all of St. Geneviève’s issued and outstanding shares. As a result, St. Geneviève is now a wholly-owned subsidiary of Mesa. In connection with the acquisition, St. Geneviève’s shareholders received one Mesa share for each 6.5394054 St. Geneviève shares held.

	(b)	As at December 31, 2008, the assets of SMD included 2,952,217 shares of Strike purchased at a price of $354,266. As the purchase price exceeded the quoted market value at the date of purchase, an unrealized loss of $88,566 was recorded in the 2008 Consolidated Statements of Operations and Deficit. In February 2009, SMD acquired a further 500,000 shares of Strike for a consideration of $60,000 as committed for in 2008. Since the purchase price exceeded the quoted market value at the date of acquisition, an unrealized loss of $47,500 has been recorded in the 2009 Consolidated Statements of Operations and Deficit.

-10-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7	Capital Assets

	December 31, 2009						December 31, 2008
					$							$
			Accumulated						Accumulated
	Cost		amortization		Net Value		Cost		amortization		Net Value

Computer & office equipment		14,400		2,244		12,156		-		-		-
Automobiles		34,000		6,055		27,945		-		-		-

		48,400		8,299		40,101		-		-		-

8	Mining assets

	2009		2008
		$	$

Cost and deferred exploration expenses		18,256,842		9,658,935
Deposits on mining assets		-		42,380
		18,256,842		9,701,315

Exploration properties

		Cost				Deferred exploration expenses				Total		Total

		2009		2008		2009		2008		2009		2008
			$		$		$		$		$		$

Canada - Ontario
	Spider No. 1 / MacFadyen and
	Kyle (a)(b)(c)(d)		264,867		264,867		2,237,084		2,187,948		2,501,951		2,452,815
	Spider No. 3 / McFaulds Lake
	(a)(e)		156,281		156,281		4,033,414		4,033,414		4,189,695		4,189,695
	Wawa (a)(b)		64,995		64,995		91,949		91,949		156,944		156,944
	Freewest (a)(f)		58,900		58,900		4,701,472		1,940,474		4,760,372		1,999,374
	Diagnos (a)(b)		19,065		19,065		78,800		78,800		97,865		97,865
	Pele Mountain (a)(b)(g)		109,676		109,676		369,602		242,856		479,278		352,532
	Uniform Surround (b)(h)		7,747		7,747		203		203		7,950		7,950
	East West option (i)		128,849		128,849		275,397		264,373		404,246		393,222
	Railway infrastructure (k)		2,897,437		-		-		-		2,897,437		-
	Smelter Royalty (l)		2,632,587		-		-		-		2,632,587		-
	Victor West (m)		119,979		-		-		-		119,979		-
	Other		5,289		5,289		3,249		3,249		8,538		8,538
			6,465,672		815,669		11,791,170		8,843,266		18,256,842		9,658,935

(a)

On May 15, 2006, the Company and Spider Resources Inc. (“Spider”) agreed to amend and revise their joint venture agreement. The companies agreed to treat each project in their joint venture as a separate joint venture, to enable each company to either increase or decrease its interest in a project based upon their respective strategic objectives. The Company and Spider agreed to have their respective interest established at 50% in all the current projects of the joint venture.

-11-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	Each party agreed to have its interest diluted by not contributing further to the other party’s exploration program until its interest has reached 331/3%. At that level, a party’s interest in a project may be maintained by contribution to subsequent programs, or suffer further dilution. When an interest has been reduced to less than 10%, it will be automatically converted to a 0.5% Net Smelter Royalty (“NSR”) in base metals and a 1% NSR in precious metals and diamonds.

(b)	In April 2008, the Company transferred to its wholly-owned subsidiary DDI, the diamond group claims. The fair market value of the mining assets transferred was evaluated at $7,000,000. Consequently, the Company recorded a write-down of mining assets of $5,383,821 prior to the transfer. In December 2008, the Company recorded an additional write-down of $5,311,380 for a total of $10,695,201.

Write-down and write-off of mining properties	2009		2008
		$		$
Write-down
MacFadyen		-		9,120,028
Wawa		-		615,355
Pele Mountain		-		885,104
Uniform		-		31,170
Diagnos		-		43,544
		-		10,695,201
Write-off
Geraldton		-		116,065
Greenstone		-		18,000
		-		134,065

Total		-		10,829,266

(c)	Ashton Mining Canada Ltd. holds a 25% claw back entitlement to any kimberlite property found or developed by KWG/Spider within the geographic limits of the Spider No. 1 project area, with the exception of Kyle Lake No. 1 where Ashton Mining relinquished its rights, which can be executed by paying KWG/Spider an amount equal to 300% of all exploration expenditures on said property.

(d)	The Kyle project was optioned to the new operator, Renforth Resources Inc. (formerly Wycliffe Resources Inc) (“Renforth”), who may earn a 55% interest by transferring a group of adjacent claims and incurring a total of $6 million of exploration expenditures, over a period of three years. The Company’s interest will then be reduced to 22.5% and may be further reduced to 15% by Spider incurring exploration expenditures equal to its prior capital in the KWG/Spider Joint Venture (“KWG/Spider”).

(e)	Following work performed in 2002 and the discovery of massive sulphide mineralization, KWG/Spider and De Beers Canada Exploration Inc. (“De Beers”) entered into a royalty agreement whereby De Beers transferred the acquired participating interest in the Spider No. 3 project in consideration of a 1.5% (NSR) royalty on all mineral products that may be produced from the property. KWG/Spider did not exercise the option to buy back one third (0.5%) of the royalty for a purchase price of $1,500,000 prior to April 30, 2008.

-12-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	On March 6, 2009, UC Resources Ltd. (“UC”), Spider Resources Inc. and the Company signed an option agreement pertaining to the McFaulds east and west properties held jointly by Spider and the Company in the James Bay Lowlands area of Northern Ontario.
	The option agreement provides that UC Resources can earn up to a 55% interest in these properties by expending a total of $4.5 million prior to March 6, 2011. In addition, UC is the operator of the exploration program during its earn-in, after which operatorship is dictated by the terms of a joint venture agreement, where operatorship resides with the party holding the greatest interest in the project.
	Under the terms of the option agreement, UC had to spend $1 million on exploration prior to March 6, 2008, to earn a 10% interest, which was included in the letter of intent, in the land package. In year two, UC was required to spend an additional $1 million prior to March 6, 2009 to obtain an additional 15% of the property package. In year three, UC was required to spend a further $1.25 million prior to March 6, 2010 to obtain a further 15% of the property package. All three of these commitments have been fulfilled by UC at this time for a completed 40% interest.
	A final incremental interest of 15% can be earned by UC if it spends $1.25 million prior to March 6, 2011, thus making UC’s total commitment $4.5 million in exploration expenditures.

(f)	In December 2005, KWG/Spider entered into an agreement with Freewest Resources Canada Inc. for the acquisition of a 25% interest in certain mining property claims contiguous to McFauld’s Lake in Ontario. The contribution of the Company included a commitment to carry out exploration work in the amount of $1,500,000 before October 13, 2009 of which at least $200,000 was incurred before February 28, 2006; and accordingly, each of KWG and Spider has earned a 25% interest of the property.

	On March 27, 2009, the Company negotiated an amendment to the Freewest Option Agreement whereby the option earn-in calls for a $15 million, three-year commitment. As a result of this amendment, the Company no longer is required to prepare a bankable feasibility study within 18 months, as had been called for in the 2005 agreement. Under the amendment, KWG would have options for up to a $7.5 million commitment over the next three years, of which $2.5 million would be required to be spent before March 31, 2010. In early 2010, Freewest was served with a notice that this first commitment had been met.

(g)	In July 2006, the Company acquired from Pele Mountain Resources Inc. certain Attawapiskat River claims located in the Porcupine Mining Division in the Province of Ontario in consideration for 10,127,860 treasury shares. The transaction was recorded at the fair value of the common shares given up at the date of the transaction. The fair value of the common shares was determined based on the quoted value of the shares. The mineral rights transferred are subject to a 1.0% net product royalty, of which 0.5% may be purchased at any time for $5,000,000. During the year, the Company staked additional claims for total cost including inherent acquisition expenses of $126,746.

(h)	In February 2007, the Company acquired a 28.12% participating interest and a 2% NSR on a group of claims adjoining the east side of the MacFadyen JV property. These mineral claims surround the DeBeers claims that host the Uniform Pipe.

-13-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

(i)	On July 23, 2008, the Company acquired an option to earn a 65% interest in a group of claims held by East West Resources Corporation. The Company issued 2,000,000 shares at a price of $ 0.034 per share and paid $50,000 for the option for a total of $118,000. The Company must incur exploration expenditures of $250,000 in each of 2008 and 2009 and an additional $1,000,000 by August 2012 to earn 60%. An additional 5% may be earned in any mineral deposit discovered by the Company providing development and production financing. During the year, the Company incurred $11,024 ($264,373 in 2008) in exploration expenses.

(j)	In December 2004, the Company disposed of its interest in Haiti in consideration for work commitments from the purchaser and a 1.5% NSR on all mineral products from the Haitian properties. The purchaser has the right to buy back the NSR by paying to the Company US$750,000 in two installments of (i) US$250,000 and (ii) US$500,000 respectively. In 2008, the Company agreed to reduce the remaining price of repurchase of the royalty to US$100,000 and received the last two installments totaling $117,751 (US$100,000). This amount was recorded as a gain on disposal of royalty since all Haitian properties had been written off in accordance with the Company’s accounting principles.

(k)	During the year, the Company through its wholly-owned subsidiary Canada Chrome Corporation, commenced operations in an effort to explore and develop a transportation link to the Company’s properties in Northern Ontario in order to increase the economic viability of these properties. These operations entailed a detailed analysis of railroad route alternatives, preliminary soils analysis and claim staking. All costs related to this project have been capitalized.

(l)	On July 22, 2009, the Company completed the purchase of a 1% net smelter royalty in the Black Thor, Black Label and Big Daddy chrome discoveries in the James Bay lowlands for cash consideration of $1,635,000 including $635,000 payable at the closing of the transaction and a further $1 million payable within one year, and the issuance of 15 million common shares and 15 million common share purchase warrants, with each share purchase warrant entitling the holder to purchase a common share at a price of 10 cents for a period of five years. The common shares have been valued at $600,000 and the warrants at $370,000 (Note 9(iii)) making the total cost of the purchase $2,605,000. Additional ancillary costs of $27,587 were also incurred and these have been capitalized. Included in accounts payable at the end of the year is the amount of $1,000,000 related to the purchase, which is due in July 2010.

(m)	The Company, through its wholly-owned subsidiary DDI, purchased a 100% interest in certain claims in the Victor West area in the James Bay Lowlands south of The Pele Mountain property and west of the Victor Mines during the year. All costs related to this purchase have been capitalized.

-14-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

Cost and deferred exploration expenses	2009		2008
		$		$

Balance - Beginning of year		9,658,935		16,897,432

Acquisition, staking and permits		5,650,003		165,845
Write-down and write-off of mining assets		-		(1,900,130	)
		5,650,003		(1,734,285	)
Exploration expenses
Drilling		1,211,890		2,051,619
Geology		848,873		-
Geophysics		147,843		391,078
Sampling		103,876		118,640
Consulting		127,129		451,672
Field preparation		3,811		5,859
Management		170,439		145,211
Line cutting and road		55,658		154,931
Camp expenses		121,641		105,914
Resource studies		43,809		-
Drafting		14,080		-
Planning		33,891		-
Fuel		45,955		-
Survey		19,009		-
Write-down and write-off of mining assets		-		(8,929,136	)
		2,947,904		(5,504,212	)
Balance - End of year		18,256,842		9,658,935

9	Share capital
	Authorized
	An unlimited number of common shares
	Issued
	Changes in the Company’s share capital were as follows:

			2009					2008
	Number of shares		Amount			Number of shares		Amount
			$						$
Balance - Beginning of year		288,134,821		27,835,259			262,863,821		27,212,107
Issued for Canadian exploration expenses
(iv)(v)(vii)		67,489,920		4,086,845			18,475,000		369,500
Less: Value of warrants		-		(754,582	)		-		(66,510	)
Issued for working capital requirements
(i)(ii)(iv)(viii)		80,334,056		4,825,226			4,000,000		200,000
Less: Value of warrants		-		(1,106,944	)		-		(34,510	)
Issued for acquisition of mining assets
(iii)		15,000,000		970,000			2,000,000		68,000
Less: Value of warrants		-		(370,000	)		-		-
Issued for commission (v)		2,204,746		143,308			-		-
Issued for following exercise of warrants and
compensation options		24,699,967		1,458,649			796,000		86,672
Less: Value of warrants		-		(48,262	)		-		-
Reduction of share capital issued (vi)		-		(20,000,000	)		-		-

Balance - End of year		477,863,510		17,039,499			288,134,821		27,835,259

-15-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	(i)	On January 20, 2009, Cliffs Natural Resources Inc. (“Cliffs”) entered into an Option to Purchase Securities (the “Option Agreement”) in the Company on or before March 16, 2009 in the aggregate amount of $4,516,750 (US$3,500,000).
		As permitted by section 7(c) of the Option Agreement, on March 16, 2009, Cliffs assigned the Option Agreement to an affiliated entity, Cliffs Greene B.V. (“Cliffs B.V.”). At that same date Cliffs B.V exercised the option to subscribe for:

		50,448,987 units of the Company (each a “Unit”) at a subscription price of $0.06218 (US$0.048893) per Unit, with each Unit comprised of one (1) common share in the capital of the Company (each a “Common Share”) and approximately 0.44 of a non-transferable Common Share purchase warrant of the Company (each such whole common share purchase warrant, a “Warrant”), with each Warrant entitling Cliffs to purchase one (1) Common Share at $0.063065 (US$0.05) during the first year after issuance thereof and $0.12613 (US$0.10) thereafter, subject to the undertaking of the Company to reduce such price to $0.063065 (US$0.05) upon receipt of all necessary regulatory approvals. Each Warrant would be exercisable for a period of 20 business days following the issuance by the Company of five (5) Common Shares upon the exercise of any of the warrants, options and other rights to purchase or obligations to issue Common Shares outstanding as at the date of execution of the Option Agreement, and would terminate on the fifth anniversary of the date of issuance of the Warrants; and a non-transferable, non-interest bearing, secured convertible debenture of the Company in the principal amount of $1,303,425 (US$1,033,398) maturing on April 16, 2009, such amount being equal to the difference between $4,414,550 (US$3.5 million) and the aggregate subscription price of $3,111,125 (US$2,466,602) payable for the Units above (the “Debenture”). The Debenture was to be converted automatically and without any further action on the part of the Company or Cliffs into Units at the rate of $0.061670 (US$0.048894) per Unit resulting in a further issuance to Cliffs of 21,135,069 Units comprised of 21,135,069 Common Shares and 9,310,839 Warrants.

		The fair value of the purchase warrants included in the units was estimated using the BlackSholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 1.87% and an expected life of five years. As a result, the fair value of the purchase warrants was estimated at $665,091 after a pro-rata allocation of the fair value of the units’ components.

		On March 16, 2009, in connection with the exercise of the option granted to Cliffs pursuant to the Option Agreement, the Company and Cliffs B.V. entered into a shareholders’ agreement which provides Cliffs with certain rights of first refusal, pre-emptive rights and the ability to appoint a director to the Company Board of directors.

	(ii)	At the annual and special meeting of the shareholders of the Company held on April 15, 2009 (the “Shareholders’ Meeting”), the disinterested shareholders approved the conversion of the principal amount of the debenture $1,303,425 (US$1,033,398) into 21,135,069 units of the Company comprised of 21,135,069 common shares and 9,310,839 warrants.

		The fair value of the purchase warrants included in the units was estimated using the Black-Sholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 1.87% and an expected life of five years. As a result, the fair value of

-16-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

		the purchase warrants was estimated at $267,903 after a pro-rata allocation of the fair value of the units’ components.

		Following the conversion of the debenture, Cliffs held an aggregate of 71,584,056 common shares and 31,535,623 warrants representing 19.9% of the issued and outstanding common shares on a fully diluted basis.

		Each warrant entitles Cliffs to purchase one (1) common share at $0.05233 (US$0.05) until March 16, 2010 and $0.10466 (US$0.10) thereafter (subject to the undertaking of the Company to reduce such price to $0.05233 (US$0.05) upon regulatory approval) and is exercisable for 20 business days following the issuance by the Company of five (5) common shares upon the exercise of any of the warrants, options and other rights to purchase or obligations of the Company to issue common shares outstanding as at January 20, 2009. To the extent not previously exercised the warrants will expire on March 16, 2014.
		The conversion of the debenture resulted in a change of control for purposes of certain employment and consulting agreements between the Company and its directors and officers. As a result a payment totalling $435,000 was made to directors and officers which is included in administrative expenses.

	(iii)	On July 22, 2009, the Company issued 15 million common shares and 15 million common share purchase warrants as partial consideration for the purchase of a 1-percent net smelter royalty (Note 7). Each purchase warrant entitles the holder to purchase one common share at a price of $0.10 for a period of five years.
		The fair value of the purchase warrants included in the units was estimated using the Black-Scholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 1.87% and an expected life of five years. As a result, the fair value of the purchase warrants was estimated at $370,000 after a pro rata allocation of the fair value of the units’ components.

	(iv)	On August 20, 2009, the Company completed a non-brokered private placement of 20,000,000 “flow-through” units and 8,750,000 units, for total subscriptions of $1,437,500. Both “flow-through” units and units were issued at $0.05 each and comprised one common share of KWG and one common share purchase warrant exercisable at a price of $0.10 per warrant to acquire one common share for a period of five years.

		Cliffs Greene B.V. (“Cliffs”), an affiliate of Cliffs Natural Resources Inc., in order to maintain its 19.9% equity interest in KWG, subscribed for all of the units. Directors and Officers of KWG and its subsidiary Canada Chrome Corporation, subscribed for $622,500 of the “flow-through” units.
		The fair value of the purchase warrants included in the units was estimated using the Black-Scholes method based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 1.87% and an expected life of five years. As a result, the fair value of the purchase warrants was estimated at $572,500 after a pro rata allocation of the fair value of the units’ components.

-17-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	(v)	On December 7, 2009 the Company completed a private placement totalling 47,489,920 units at $0.065 each for an aggregated amount $3,086,845. Each unit is comprised of one flow-through common share and one half common share purchase warrant at a price of $0.10 per share until December 7, 2010. Finder’s fees totalling 2,204,746 compensation units were paid to five qualified parties and each such unit was comprised of one non flow-through share and one-half common share purchase warrant. All common shares acquired in both the flow-through and non flowthrough units are subject to a four month hold period.

		The fair value of the purchase warrants included in the units was estimated using the Black-Scholes model based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 0.54% and an expected life of one year. As a result, the fair value of the purchase warrants was estimated at $356,982 after a pro-rata allocation of the fair value of the units’ components.

		The fair value of the Warrant portion of the agent’s compensation units was estimated using the Black-Scholes model based on the following assumptions: dividend yield of 0%, volatility of 100%, risk-free interest rate of 0.54% and an expected life of one year. As a result, the fair value of the compensation options was estimated at $18,740.

	(vi)	At the Shareholders’ Meeting held on April 15, 2009, the shareholders also approved the reduction of the issued and paid-in capital account of the Company by $20,000,000 without reimbursement to the shareholders and the reduction of the deficit by same amount. This amount has been recorded in the current fiscal year.

	(vii)	On December 31, 2008, the Company completed a private placement totalling 18,475,000 units at $0.02 each for an aggregated amount $369,500. Each unit is comprised of one flow-through common share and one common share purchase warrant at a price of $0.05 per share until December 31, 2009 and thereafter, at a price of $0.10 until December 31, 2010. Limited Market Dealer Inc. acted as agent and was paid a due diligence fee of $11,085 as well as a finder’s fee consisting of a cash payment of $18,475 and 1,847,500 compensation options. Each compensation option is exercisable into one non-flow-through unit having the same other terms and conditions as the units issued in the private placement, at a price of $0.05 until December 31, 2009 and thereafter at a price of $0.10 until December 31, 2010.
		The fair value of the purchase warrants included in the units was estimated using the Black-Scholes model based on the following assumptions: dividend yield of 0%, volatility of 120%, risk-free interest rate of 2.22% and an expected life of two years. As a result, the fair value of the purchase warrants was estimated at $66,510 after a pro-rata allocation of the fair value of the units’ components.
		The fair value of the agent’s compensation options was estimated using a binominal pricing model based on the following assumptions: dividend yield of 0%, volatility of 120%, risk-free interest rate of 2.22% and an expected life of two years. As a result, the fair value of the compensation options was estimated at $12,933.

	(viii)	On August 26, 2008 the Company completed a private placement totalling 2,000,000 units at a price of $0.10 each for an aggregate amount of $200,000. Each unit is comprised of two common shares and one purchase warrant exercisable at a price of $0.10 for a period of 24 months from closing.

-18-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	The fair value of the purchase warrants included in the units was estimated using the Black-Scholes model based on the following assumptions: dividend yield of 0%, volatility of 119%, risk-free interest rate of 3.32% and an expected life of two years. As a result, the fair value of the purchase warrants was estimated at $34,510 after a pro-rata allocation of the fair value of the units’ components.

10	Warrants and compensation options
	Changes in the Company’s outstanding common share purchase warrants and compensation options were as follows:

	Year ended									Year ended
	December 31, 2009									December 31, 2008
	Warrants			Compensation			Amount			Warrants			Compensation			Amount
				options			$						options				$
Issued
Balance - Beginning of year		94,005,808			9,060,157			1,637,809			91,830,808			7,987,157			1,723,358
Issued as part of private placement of
units (note 9(i)(ii)(iv)(v)(vii)(viii))		84,030,583			-			1,861,526			20,475,000			-			101,020
Issued for acquisition of mining assets
(note 9(iii))		15,000,000			-			370,000			-			-			-
Agent’s compensation options
(note 9(v)(vii))		2,529,967			1,102,373			18,740			-			1,847,500			12,933
Exercised		(18,475,000	)		(4,377,467	)		(137,439	)		(500,000	)		(296,000	)		(17,432	)
Extension of warrants maturity date		-			-			660,000			-			-			-
Expired		(17,381,560	)		(4,682,690	)		(379,550	)		(17,800,000	)		(478,500	)		(182,070	)

Balance - End of year		159,709,798			1,102,373			4,031,086			94,005,808			9,060,157			1,637,809

	Outstanding common share purchase warrants and compensation options entitle their holders to subscribe for an equivalent number of common shares.

	On May 22, 2009, the TSX Venture Exchange approved the amendment to the terms of 56,149,248 of the company’s outstanding warrants, confirming the extension of warrants having expiry dates varying from June 18 to December 21, 2009 to new expiry dates varying from June 18 to December 21, 2012. The exercise price of the warrants was not amended.
	The fair value of the warrants for which the maturity period was extended was estimated using the BlackScholes financial model based on the following assertions: dividend yield of 0%, volatility of 100%, riskfree interest rate of 1.84% and an expected life of three years. As a result, the fair value of the extended purchase warrants was estimated at $660,000 which amount was accounted for as an expense in the Consolidated Statement of Operations and Deficit.

-19-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

A summary of the Company’s outstanding warrants and compensation options as at December 31, 2009 is presented below:

Number of warrants		Compensation options		Exercise price $			Expiry date
	2,000,000		-		0.10	August 2010
	17,994,960		-		0.10	November 2010
	5,750,000		1,102,373		0.10	December 2010
	2,529,967		-		0.065	October 2011
	200,000		-		0.10	May 2012
	1,300,000		-		0.10	June 2012
	1,000,000		-		0.10	July 2012
	6,600,000		-		0.10	September 2012
	26,476,923		-		0.10	October 2012
	9,375,000		-		0.12	October 2012
	4,135,000		-		0.15	December 2012
	7,062,325		-		0.18	December 2012
	22,224,784		-	0.05/0.10 U.S.		March 2014
	9,310,839		-	0.05/0.10 U.S.		April 2014
	15,000,000		-		0.10	July 2014
	28,750,000		-		0.05/0.10	August 2014
	159,709,798		1,102,373

11	Stock option plan

	The Company maintains a stock option plan (the “Plan”) whereby the Board of Directors may from time to time grant to employees, officers, directors and consultants of the Company or any subsidiary thereof options to acquire common shares in such numbers, for such terms and at such exercise prices as may be determined by the Board, provided that the exercise price may not be lower than the market price of the common shares at the time of the grant of the options.
	As at December 31, 2009, the Plan provides (i) that the maximum number of common shares that may be reserved for issuance under the Plan shall be equal to 40,000,000 common shares (as at December 31, 2008 - 26,280,000); (ii) that the maximum number of common shares which may be reserved for issuance to any one optionee pursuant to a share option may not exceed 5% of the common shares outstanding at the time of the grant; and (iii) that the maximum number of common shares that may be reserved for issuance to insiders of the Company is limited to 10% of the common shares outstanding at the time of the grant.
	Options vest over an 18-month period: 25% at the date of the grant and 12.5% in each of the following six quarters. Options granted must be exercised over a period no longer than five years after the date of grant, and they are not transferable.

-20-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	A summary of changes in the Company’s stock options outstanding is presented below:
	Options at a fixed price

				2009					2008
				Average		Average
	Number of			exercise		Number of			exercise
	shares			price		shares			price
				$						$

Balance - Beginning of year		23,868,880			0.11		23,881,080			0.11
Granted		6,558,500			0.10		3,379,700			0.10
Exercised		-			-		-			-
Cancelled or expired		(395,100	)		0.15		(3,391,900	)		0.13
Balance - End of year		30,032,280			0.10		23,868,880			0.11

The following table summarizes information about options outstanding and exercisable as at December 31, 2009:

				Outstanding		Exercisable
				options		options

				Average
Exercise		Number of		contractual life
price		options		(in years)
$
	0.10		23,591,780		2.15		18,572,905
	0.12		5,940,500		2.68		5,940,500
	0.15		500,000		2.81		500,000

			30,032,280				25,013,405

	Total stock compensation costs for the year ended December 31, 2009 amounted to $252,266 (2008 - $448,037).

	The fair value of the options granted in 2009 and 2008 was estimated using the Black-Scholes option pricing model based on the following assumptions:

	2009			2008

Average dividend per share	Nil			Nil
Estimated volatility		100	%		85	%
Risk-free interest rate		0.67	%		3.85	%
Expected life of the options granted	5 years			5 years
Weighted average of estimated fair value of each option granted	$	0.057		$	0.063

-21-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

12	Contributed surplus

	2009		2008
		$		$
Balance - Beginning of year		2,626,615		1,996,508
Stock compensation costs (note 11)		252,266		448,037
Expiry of warrants (note 10)		379,550		182,070
Balance - End of year		3,258,431		2,626,615

13	Accumulated other comprehensive income (loss)

	2009			2008
		$			$
Accumulated other comprehensive income (loss) - beginning of year		(225,574	)		(36,364	)
Latent loss on temporary investments available for sale		(30,231	)		(189,210	)
Accumulated other comprehensive income (loss) - end of year		(255,805	)		(225,574	)

	2008			2008
		$			$

Latent loss on temporary investments - beginning of year		(225,574	)		(36,364	)
Unrealized gain (loss) for the year on Spider investment		6,250			(22,500	)
Unrealized gain (loss) for the year on Mesa investment		5,302			(33,860	)
Unrealized gain (loss) for the year on Strike investment		(41,783	)		(132,850	)

Latent loss on temporary investments - end of year		(255,805	)		(225,574	)

With respect to the Company’s investments, the latest loss on temporary investments available for sale adjustments represent the unrealized gain or loss on the Company’s net investments (note 6).

-22-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

14	Income taxes
	The future income tax balances are summarized as follows:
	(i)	The provision for income taxes presented in these Consolidated Financial Statements is different from what would have resulted from applying the combined Canadian Statutory tax rate as a result of the following:

	2009			2008
		$			$
Loss before income taxes		(4,100,326	)		(12,271,901	)
Combined federal and provincial income tax at 32.42% (32.85% in 2008)		(1,329,122	)		(4,031,319	)
Impact of decrease (increase) income tax rate on future income tax balances		1,830,923			(107,611	)
Expired tax losses		99,623			75,226
Stock compensation costs		81,772			147,180
Non-taxable portion of capital gain		-			318
Warrants extension cost		213,939			-
Other		(3,135	)		(18,545	)
Valuation allowance		(999,000	)		2,794,753
Recovery of future income taxes		(105,000	)		(1,140,000	)

(ii)

Future income tax assets

	2009			2008
		$			$
Current future income tax assets
Non-capital losses		110,000			100,000
Share and warrant issue expenses		67,000			54,000
		177,000			154,000
Valuation allowance		(177,000	)		(154,000	)
Current future income tax assets		-			-
Long-term future income tax assets
Mining assets and deferred exploration expenses		6,741,000			6,546,000
Non-capital losses		1,839,000			1,277,000
Capital losses		10,797,000			12,544,000
Share and warrant issue expenses		102,000			108,000
Investments		52,000			41,000
Exploration equipment		623,000			660,000
		20,154,000			21,176,000
Valuation allowance		(20,154,000	)		(21,176,000	)
Long-term future income tax assets		-			-
Total future income tax assets		-			-

-23-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

		In 2009 the Company issued flow-through units for gross proceeds of $4,086,845 (2008 − $369,500). Under the flow-through share agreements, the Company agreed to renounce $4,086,845 of qualifying expenditures to the investors effective December 31, 2009, although under Canadian tax law, the expenditures may actually be incurred up to December 31, 2010.
		The Company is required to record a provision at the time the renunciation is filed with the tax authorities, by an increase in the share and warrant issue expenses relating to the flow-through shares, for the future income taxes related to the tax deductions the Company has forgone. The Company has filed and renounced to the authorities in early 2009, therefore estimated future income taxes of $105,000 were recorded as at December 31, 2009 (2008 − $1,140,000). Consequently, the Company has recognized such expenses as share and warrant issue expenses in 2009 (2008 − $1,140,000).
	(iii)	As at December 31, 2009, the cost for income tax purposes of exploration equipment, mining assets and deferred exploration expenses totaled approximately $44,660,000. The difference between the tax cost and the amount capitalized in these Consolidated Financial Statements arises from the write-off of certain assets for accounting purposes, rollover transactions and the tax benefits related to some exploration expenses being renounced in favour of subscribers.
		The Company has accumulated non-capital losses for income tax purposes amounting to approximately $7,317,000. These losses will expire as follows:

		$
	Year ending December 31, 2010	359,000
	2014	535,000
	2015	653,000
	2026	737,000
	2027	888,000
	2028	1,274,000
	2029	2,871,000

	(iv)	The Company’s balance of capital losses amounts to approximately $84,500,760 and can be carried forward indefinitely against capital gains.
	(v)	The unamortized balance for tax purposes of share and warrant issue expenses amounting to approximately $641,000 is deductible over the next four years.
	(vi)	The tax values of assets and liabilities arising from the year ended December 31, 2009, have not been agreed with the relevant tax authorities nor have they been disputed.

15	Related party transactions
	In 2009, officers and companies controlled by officers were paid consulting fees totalling $172,787 ($238,244 in 2008) of which $nil remained payable at December 31, 2009 ($4,125 in 2008) and directors of the Company and a company controlled by a director of the Company were paid $85,699 ($68,768 in 2008) for professional consulting services.

-24-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

16	Financial instruments
	The Company is exposed to various financial risks resulting from both its operations and its investments activities. The Company’s management manages financial risks. The Company does not enter in financial instrument agreements including derivative financial instruments for speculative purposes. The Company’s main financial risk exposure and its financial risk management policies are as follows:

	Interest rate risk
	Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in the market interest rates.

	Credit Risks
	It is management’s opinion that the Company is not exposed to significant credit risks.
	Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company is subject to concentrations of credit risk through cash and accounts receivable. The Company reduces its credit risk by maintaining part of its cash in financial instruments guaranteed by and held with a Canadian chartered bank.

	Foreign Exchange Risk
	Foreign exchange risk is the potential adverse impact on earnings and economic value due to movements and volatilities in foreign exchange rates. Prior to the current year, the Company did not have any financial assets or liabilities denominated in currencies other than Canadian and was therefore not exposed to significant foreign exchange risk. However, since the transactions with Cliffs Natural Resources (note 9 (i)(ii)) the Company now maintains cash denominated in US dollars and it also engages suppliers whose payments are required to be made in US dollars. As a result, the Company is now exposed to US dollar fluctuations. During 2009, the company realized $443,898 in net foreign exchange losses. At December 31, 2009 US dollar denominated balances included cash of US$30,925 and accounts payable of US$272,720.


	Liquidity Risk
	Liquidity risk is the risk that the Company will not be able to meet the obligations associated with its financial liabilities. As at December 31, 2009, the Company had enough funds available to satisfy its obligations under accounts payable and accrued liabilities.
	In the past few years, the Company financed its liquidity needs primarily by issuing equity securities. As the Company is currently incurring operating losses, additional capital will be required to continue exploration activities on the properties (note 1).

-25-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

	Fair Value
	The fair value of financial instruments is summarized as follows:

	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair value Hierarchy Level (note 2)
Financial assets

Held for trading:
Cash		2,056,751		2,056,751		1,528,897		1,528,897	Level 2

Available-for-sale:
Temporary investments		134,991		134,991		152,722		152,722	Level 1

	Fair value estimates are made at the balance sheet date, based on relevant market information and other information about financial instruments.
	As at both December 31, 2009 and 2008, all financial instruments (cash, accounts receivable, and accounts payable and accrued liabilities) have fair values which approximate their carrying values due to the relatively short period to maturity of the instruments. For temporary investments refer to note 6.

17	Commitments
	Pursuant to flow-through financing agreements closed during the year ended December 31, 2009, the Company must incur $1,433,801 in exploration expenses by December 31, 2010.

18	Subsequent events
	(i)	On February 23, 2010 the Company closed a private placement of $35,000 of units at a price of $0.07 per unit, each comprised of one common share and one-half of a common share purchase warrant. Each full warrant is exercisable at a price of $0.10 to acquire one common share for a period of one year from the closing date. All securities issued are subject to a hold period of four months ending June 23, 2010. The proceeds will be affected to working capital.
	(ii)	On March 19, 2010 the Company announced a proposed non-brokered private placement of a maximum of $10 million of units of securities of the Company comprised of up to 80,000,000 flow-through units at a price of $0.125 per flow-through unit, with each flow-through unit comprised of one common share of the Company to be issued on a "flow-through" basis and one-half of one Common Share purchase warrant exercisable at a price of $0.15 per Warrant to acquire one Common Share for a period of 2 years from the date of the issuance of the Warrant. The gross proceeds of the private placement will be used for eligible flow-through exploration expenses to be incurred in further assessment of the Big Daddy chromite deposit in the Ring of Fire, as well as data

-26-

KWG Resources Inc.

(An exploration stage company)

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

		accumulation for railroad engineering studies and will be renounced for the 2010 taxation year.

		On March 31, 2010 the Company closed the first tranche of this non-brokered private placement through the sale of 39,090,000 units at $0.125 each for gross proceeds of $4,886,250. Finder’s fees totaling $390,900 were paid. All securities issued pursuant to this private placement have a hold period of four months ending August 1, 2010.
		On April 16, 2010 the Company closed the second tranche of this non-brokered private placement through the sale of 22,467,308 units at $0.125 each for gross proceeds of $2,808,414. Finder’s fees totaling $224,673 were paid. All securities issued pursuant to this private placement have a hold period of four months ending August 17, 2010. Directors of the Company subscribed for $500,000 of these units.
	(iii)	On April 7, 2010 the Company was notified by Cliffs Greene B. V. (“Cliffs”) that it wished to exercise its pre-emptive right to participate in the private placement announced by the Company on March 19, 2010 and it will subscribe for such number of units that it holds a 19.9% interest in the Company on a fully-diluted basis following completion of the Private Placement and the exercise of warrants referred to below. On April 21, 2010 Cliffs purchased the final tranche of the private placement (Note 18(ii)) which consisted of 26,382,390 non flow-through units at $0.125 each for gross proceeds of $3,297,799. In the result, the private placement raised a total of approximately $11 million.

		In addition, Cliffs provided notice that it is exercising warrants previously issued to it to acquire 5,016,769 common shares of the Company for gross proceeds of US$250,839.45. These warrants were issued to Cliffs to enable it to avoid dilution of its interest in the Company, and became exercisable upon the exercise of warrants held by third parties to acquire 25,083,845 common shares of the Company.

-27-

Schedule G

SPIDER RESOURCES INC. AND KWG RESOURCES INC.

TECHNICAL REPORT ON THE MINERAL RESOURCE ESTIMATE

FOR

THE BIG DADDY CHROMITE DEPOSIT

McFAULDS LAKE AREA, JAMES BAY LOWLANDS, NORTHERN ONTARIO,

CANADA.

NTS 43D16S½

86° 14' 11" W

52° 45' 32" N

Effective Date: March 30, 2010

Signing Date: June 4, 2010

Richard Gowans, P. Eng.

Jane Spooner, M.Sc., P. Geo.

Ing. Alan J. San Martin, MAusIMM

Charley Murahwi, M.Sc., P. Geo., MAusIMM

SUITE 900 - 390 BAY STREET, TORONTO ONTARIO, CANADA M5H 2Y2

Telephone (1) (416) 362-5135 Fax (1) (416) 362 5763

Table of Contents

Page

1.0		SUMMARY			1
	1.1		TERMS OF REFERENCE, PROPERTY DESCRIPTION AND OWNERSHIP		1
		1.1.1		Terms of Reference	1
		1.1.2		Property Description	1
		1.1.3		Property	1
		1.1.4		Underlying Agreements and Ownership	1
	1.2		LOCATION AND TENURE		2
		1.2.1		Location and tenure	2
		1.2.2		Environmental and Permitting	2
		1.2.3		Accessibility, Climate, Local Resources, Infrastructure	2
		1.2.4		Physiography	2
		1.2.5		Relief and Drainage	2
		1.2.6		Accessibility	3
		1.2.7		Climate	3
		1.2.8		Vegetation	3
		1.2.9		Fauna	3
		1.2.10		First Nations	3
	1.3		GEOLOGICAL OUTLINE		4
	1.4		DEPOSIT TYPE		5
		1.4.1		Uses and Processing of Chromite	5
	1.5		MINERALIZATION		6
	1.6		EXPLORATION		6
		1.6.1		Exploration Concept	7
		1.6.2		Status of Exploration	8
		1.6.3		Exploration Results	8
	1.7		MINERAL RESOURCES		8
	1.8		INTERPRETATION AND CONCLUSIONS		11
		1.8.1		Exploration Concept	11
		1.8.2		Geology and Mineral Resources	11
		1.8.3		Metallurgy	11
		1.8.4		Market Outlook	11
		1.8.5		Project Objectives	12
	1.9		RECOMMENDATIONS		12
		1.9.1		Further Assessment of Chromite Resources	12
		1.9.2		Follow-up on Unexplained EM anomalies	13

2.0		INTRODUCTION			14
	2.1		AUTHORIZATION AND PURPOSE		14
	2.2		BACKGROUND		14
	2.3		SOURCES OF INFORMATION		15
	2.4		SCOPE OF PERSONAL INSPECTION		16
	2.5		ABBREVIATIONS		17

3.0		RELIANCE ON OTHER EXPERTS			19

4.0		PROPERTY DESCRIPTION AND LOCATION			20
	4.1		SIZE, LOCATION AND TENURE		20
	4.2		COSTS OF MAINTENANCE		21
	4.3		ROYALTIES AND PROPERTY RIGHTS		22
		4.3.1		4.3.1 Underlying Agreements	22
		4.3.2		Royalty Interests	23
		4.3.3		Other Parties to the Agreement	23
	4.4		ENVIRONMENTAL AND PERMITTING		23
		4.4.1		Current Status	23
		4.4.2		Baseline Line Environmental Studies	24

5.0		ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY			25
	5.1		PHYSIOGRAPHY		25
	5.2		RELIEF AND DRAINAGE		25
	5.3		ACCESSIBILITY AND INFRASTRUCTURE		26
	5.4		CLIMATE		27
	5.5		VEGETATION		27
	5.6		FAUNA		27
	5.7		FIRST NATIONS		28
	5.8		LOCAL RESOURCES		28

6.0		HISTORY			29
	6.1		GENERAL		29
	6.2		PROPERTY HISTORY		30
	6.3		HISTORIC PRODUCTION		30

7.0		GEOLOGICAL SETTING			32
	7.1		REGIONAL GEOLOGY		32
	7.2		LOCAL GEOLOGY		32
	7.3		PROPERTY GEOLOGY		34

8.0		DEPOSIT TYPES			37
	8.1		RELATED DEPOSITS		37
	8.2		GENETIC MODEL FOR STRATIFORM CHROMITE		38

9.0		MINERALIZATION			42
	9.1		OVERVIEW		42
	9.2		LOCALIZATION		42
	9.3		DISTRIBUTION OF CHROMITE GRADES		42
	9.4		SULPHIDES AND PGE		43

10.0		EXPLORATION			44
	10.1		2009-2010 EXPLORATION		44

		10.1.1		QA/QC.	44
		10.1.2		Evaluation of PGE – Potential of Hanging Wall Pyroxenite	44
		10.1.3		Ground Geophysical Surveys	44
		10.1.4		T-2 Target	45
	10.2		DELINEATION STAGE - 2009/2010 DRILLING		45
	10.3		INTERPRETATION OF EXPLORATION INFORMATION		46

11.0		DRILLING			48
	11.1		2004, 2006 AND 2008 DRILLING CAMPAIGNS		48
	11.2		2009/2010 DRILLING CAMPAIGN		48
	11.3		DRILLING PROTOCOLS		48
		11.3.1		Spotting and Surveying of Drill Collars	48
		11.3.2		In-hole Directional Surveys	50
	11.4		SUMMARY AND INTERPRETATION OF THE RESULTS OF THE DRILLING COMPLETED ON THE BIG DADDY DEPOSIT
					51

12.0		SAMPLING METHOD AND APPROACH			55

13.0		SAMPLE PREPARATION, ANALYSES AND SECURITY			57
	13.1		QUALITY CONTROL MEASURES BEFORE DISPATCH OF SAMPLES		57
		13.1.1		Pre-2008 Drill holes and Samples	57
		13.1.2		2008 Analyses	57
		13.1.3		2009-2010 Analyses	57
	13.2		LABORATORY DETAILS		58
	13.3		SAMPLE PREPARATION		58
	13.4		ANALYSES		58
		13.4.1		2006/2008 Analyses	59
		13.4.2		2009/2010 Cr2O3 Analyses	59
		13.4.3		INAA versus Fusion XRF	59
		13.4.4		Laboratory In-house QA/QC	60
	13.5		SECURITY		60

14.0		DATA VERIFICATION			61
	14.1		INTRODUCTION		61
	14.2		SITE VISIT (OCTOBER, 2009)		61
		14.2.1		Overview	61
		14.2.2		SG Determinations	61
	14.3		RESOURCE DATABASE VALDATION		62
	14.4		CONCLUSIONS ON DATA VERIFICATION		63

15.0		ADJACENT PROPERTIES			64
	15.1		CHROMITE		64
		15.1.1		Black Thor / Black Label	64
		15.1.2		Black Creek	64
		15.1.3		Blackbird	65

iii

	15.2		FE-VA-TI (THUNDERBIRD)		66
	15.3		MAGMATIC MASSIVE SULPHIDES (NI-CU-PGE) – EAGLE ONE		66
	15.4		VOLCANOGENIC MASSIVE SULPHIDES (CU-ZN) – MCFAULDS DEPOSITS		67

16.0		MINERAL PROCESSING AND METALLURGICAL TESTING			68
	16.1		METALLURGICAL SAMPLES		68
	16.2		MINERALOGICAL AND CHEMICAL ANALYSIS		69
		16.2.1		WIM Preliminary Test Program	69
		16.2.2		SGS-L Preliminary Testwork Program	70
	16.3		METALLURGICAL TESTING		73
		16.3.1		WIM Preliminary Test Program	73
		16.3.2		SGS Preliminary Testwork Program	74
	16.4		RECOMMENDATIONS		78

17.0		MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES			79
	17.1		DATABASE DESCRIPTION		79
		17.1.1		Drill Holes and Assays	79
		17.1.2		Lithology and Mineralization	79
		17.1.3		Survey	79
		17.1.4		Specific Gravity (2,216 determinations)	79
		17.1.5		Surpac Master Database	80
	17.2		ESTIMATION DETAILS		80
		17.2.1		Overview of Estimation Methodology	80
		17.2.2		Geological Modelling/Interpretation	80
		17.2.3		Statistical Interpretation of Grade Domains	83
		17.2.4		Composite Data and Grade Domains Statistics	85
		17.2.5		Cut-off Grade and Economic Parameters	87
		17.2.6		Geostatistics	87
		17.2.7		Interpretation and Application of Spatial Analysis Results.	88
		17.2.8		Block Size, Interpolation Search Parameters and Technique	89
		17.2.9		Block Modelling Description.	90
	17.3		CLASSIFICATION CRITERIA AND BLOCK MODELLING RESULTS		90
		17.3.1		Classification Criteria	90
		17.3.2		Responsibility For Estimation	91
		17.3.3		Statement of Results	91
		17.3.4		Comments	94
		17.3.5		Validation	97
		17.3.6		Qualification of the Mineral Resources	97
		17.3.7		Potential Upgrading of the Indicated Resource	97

18.0		OTHER RELEVANT DATA AND INFORMATION			98
	18.1		THE MARKET FOR CHROMITE		98
	18.2		OVERVIEW		98
	18.3		PRODUCTION OF CHROMITE AND FERROCHROMIUM		99

	18.4		END-USE SECTORS		100
		18.4.1		Stainless Steel	101
	18.5		INDUSTRY STRUCTURE		101
	18.6		PRICES		101
	18.7		OTHER RELEVANT DATA AND INFORMATION		102

19.0		INTERPRETATION AND CONCLUSIONS			103
	19.1		EXPLORATION CONCEPT		103
	19.2		GEOLOGY AND MINERAL RESOURCES		103
	19.3		METALLURGY		103
	19.4		MARKET OUTLOOK		103
	19.5		PROJECT OBJECTIVES		104

20.0		RECOMMENDATIONS			105

21.0		REFERENCES			107
	21.1		TECHNICAL REPORTS (SEDAR/IN-HOUSE)		107
	21.2		SCIENTIFIC PUBLICATIONS AND REPORTS		109

22.0		DATE AND SIGNATURE PAGE			114

23.0		CERTIFICATES			115

List of Appendices

APPENDIX 1	Claim Abstracts	At end of Report

APPENDIX 2	Example of QC Report for the Big Daddy Deposit	At end of Report

APPENDIX 3	Full Results of Variographic Analysis	At end of Report

APPENDIX 4	Level Plans at 50m Intervals Starting from Surface	At end of Report

APPENDIX 5	Sections at 50m Intervals	At end of Report

List of Tables

Page

Table 1.1	Summary of the Big Daddy Massive Chromite Resources	9
Table 1.2	Summary of the Big Daddy Chromite Deposit Mineral Resource @15% Cr2O3 Cut-off	10
Table 1.3	Summary of Budget Proposals for the Big Daddy Chromite Project	13
Table 2.1	Summary of Abbreviations Used	17
Table 4.1	SKF Property – Summary of Claim Abstracts as of March 19, 2010	20
Table 6.1	Summary of Exploration Completed on SKF Property between 1995 and 2008	31
Table 9.1	Distribution of Cr2O3 Grades	43
Table 11.1	List of Drill Holes Drilled on SKF Property (2004 – 2010 Programs) (UTM Zone 16, NAD’83	49
Table 11.2	Big Daddy : Drill Intercept Summary (>25% Cr2O3)	52
Table 13.1	Standards Used During 2009/2010 Drilling and Re-sampling Programs	57
Table 13.2	Summary of Cr and Cr2O3 Analyses by Method	58
Table 13.3	Analytical Methods for 2009-2010 Drilling and Resampling Programs	59
Table 15.1	Resource Estimate by the Sibley Basin Group Ltd. (A. Aubut, 2009)	64
Table 15.2	Black Creek intersections (Probe Mines Ltd, 2009)	65
Table 15.3	Summary of Blackbird resource showing all categories (Micon, 2010	66
Table 15.4	Eagles Nest Resource Estimate (Golder Associates, 2010) Indicated and Inferred	66
Table 15.5	Summary of Resources on McFaulds 1 and 3 (reported by Lahti, 2008)	67
Table 16.1	SGS-L Metallurgical Samples	68
Table 16.2	Summary of XRD Analysis Results	69
Table 16.3	Summary of XRF Analysis Results	69
Table 16.4	SGS-L Metallurgical Sample Chemical Analyses	70
Table 16.5	SGS-L EPMA Results	72
Table 16.6	Summary of Metallurgical Test Results	73
Table 16.7	Average Feed and Combined Concentrate XRF Analyses	74
Table 16.8	Gravity/Magnetic Separation Test Results - 1	76
Table 16.9	Gravity/Magnetic Separation Test Results - 2	76

Table 16.10	Flotation Test Results	77
Table 17.1	Average Specific Gravity Determinations by Cr2O3 Content	80
Table 17.2	Summary of the Major Characteristics of the Big Daddy Deposit	82
Table 17.3	Global Statistics of the Cr2O3 Raw Data	84
Table 17.4	Composites Summary Statistics of the Massive Chromite Domain and the 15%Cr2O3 Cut-off Domain	87
Table 17.5	Summary Results of the Spatial/Variographic Analysis of the Big Daddy Deposits	88
Table 17.6	Summary of Search Parameters	89
Table 17.7	Summary of the Big Daddy Massive Chromite Resources	91
Table 17.8	Summary of the Big Daddy Chromite Deposit Mineral Resource @ 15% Cr2O3 Cut-off	92
Table 17.9	Summary of Global Results of ID3 Versus Ordinary Kriging (OK)	97
Table 18.1	General Specifications for Chromite Grades	98
Table 18.2	World Chromite Production	99
Table 18.3	World Production of Ferrochromium	99
Table 18.4	Principal Uses for Chromite Ores and Concentrates	100
Table 18.5	Production of Stainless Steel by Region	101
Table 18.6	Representative Prices for Chromite	102
Table 20.1	Summary of Budget Proposals for the Big Daddy Chromite Project	106

vii

List of Figures

Page

Figure 2.1	Location Map of the Big Daddy Chromite Deposit	17
Figure 4.1	SKF Project Claim Map. SKF Option claims are shown in green. Claim locations are “as staked” based on GPS-derived locations of claim posts	21
Figure 5.1	Annual Mean Daily Temperature and Range, January to December (month 1 to 12	27
Figure 7.1	Regional Geological Setting of the Superior Province	32
Figure 7.2	Local Geology of the McFaulds Lake Sill showing the Big Daddy Chromite Occurrence.	33
Figure 7.3	Bedrock Geology of the Big Daddy Deposit Based on Drill Hole and Ground Geophysics. (UTM Zone 16;NAD’83	34
Figure 8.1	Phase Relations in the System Olivine-Silica-Chromite as determined by Irvine (1977)	39
Figure 8.2	Variation in Solubility of Fe-sulphide in Differentiating Basaltic Magma	40
Figure 8.3	Cross-section through a Hypothetical Layered Intrusion	41
Figure 10.1	Section 19+00 E (looking northeast) showing Pyroxenite cutting down into Massive Chromite Interval. Coloured bars below drill hole traces show chromite-bearing intervals with values below. Section is 400 m long	47
Figure 11.1	Plan Showing all Drill Holes Covering the Big Daddy Deposit	49
Figure 12.1	Sealed Rice Bags Being Placed into Pails	56
Figure 14.1	Technician Working the Totalcomp Strain Gauge	62
Figure 15.1	Claim Map of the McFaulds Lake Area (as of 22 April 2010	67
Figure 16.1	EPMA Samples, Cr:Fe Ratio vs Al2O3 and MgO	71
Figure 16.2	EPMA Samples, Cr2O3 Grade vs MgO and FeO	73
Figure 16.3	SGS Gravity and Magnetic Separation Test Flowsheet	75
Figure 17.1	Schematic Lithologic Column for McFaulds Lake Sill, Big Daddy Segment	81
Figure 17.2	Gravity Map Bandpass Filter Gravity (Upper Wavelength is 833 m) with the Massive Chrome Domain Projected to Surface from Sections	82
Figure 17.3	Histogram of the Raw Assay Data for Cr2O3 (%)	83
Figure 17.4	Probability Plot of the Raw Cr2O3 Data	85
Figure 17.5	Histogram of the Massive Chromite Domain	86

viii

Figure 17.6	Histogram of Composites at 15% Cut-off with Internal Waste	86
Figure 17.7	Block Model of the Massive Domain of the Big Daddy Chromite Deposit	93
Figure 17.8	Block Model of the Big Daddy Chromite Zone Constrained at 15% Cr2O3 Cut-off	93
Figure 17.9	Sketch of Longitudinal Section of the Big Daddy Deposit, Looking West	95
Figure 17.10	Distribution of Resources within the Block Model for the Massive Domain	96
Figure 17.11	Distribution of Resources within the Block Model constrained at 15% Cut-off	96

1.0 SUMMARY

1.1 TERMS OF REFERENCE, PROPERTY DESCRIPTION AND OWNERSHIP

1.1.1 Terms of Reference

Spider Resources Inc (Spider) represented by Messrs. Neil Novak and James Burns, President and VP Exploration, respectively, and KWG Resources Inc. (KWG) represented by Messrs. Frank Smeenk and Maurice (Moe) Lavigne, President and VP Exploration and Development, respectively, commissioned Micon International Limited (Micon) in March, 2010 to provide an independent resource estimate of the chromite mineralization in the Big Daddy deposit and to prepare a Technical Report in accordance with the requirements set out in Canadian National Instrument 43-101 (NI 43-101). The estimate of mineral resources presented in this report conforms to the CIM Mineral Resource and Mineral Reserve definitions (December, 2005) referred to in NI 43-101.

1.1.2 Property Description

The Big Daddy chromite deposit lies on mining claim P 3012253 situated in the McFaulds Lake area of the James Bay Lowlands of north-central Ontario, some 280 km due north of the town of Nakina. P 3012253 is the westernmost claim of a seven-claim, 1,241 ha property under option from Freewest Resources Canada Inc. (Freewest) by Spider and KWG (SKF option). The property is centred near 86° 14' 11" W longitude, 52° 45' 32" N latitude, in NTS map area 43D16S½.

1.1.3 Property

The property comprises five staked claims (P 3012252, P 3012253, P 3008268, P 3008269 and P 3008793) and two single unit (400 m x 400 m, 16 ha) blocks excised from adjacent claims (P 3012250 and P 3012251) to the north. The two westernmost claims and both contiguous single units are subject to a 2% Net Smelter Return royalty currently held by Richard Nemis (1%) and KWG (1%). All claims are currently registered to Freewest, however, the property is to be held by KWG in trust.

1.1.4 Underlying Agreements and Ownership

Spider and KWG each held a 25% interest in the property as of September 10, 2009. On that date each company acquired an option to earn an additional 5% interest in the property by making minimum annual expenditures of $2.5 million over three years to gain an additional 1½% in each of the first two years and 2% in the final year ending on March 31, 2012. Provided a minimum of $5 million is spent on exploration, one or both parties may also gain the balance of the 10% available for option by delivering a positive feasibility study to Freewest by March 31, 2012. Prior to March 31, 2010, Spider and KWG each spent a further $2.5 millions, earning an additional 1½%. Spider and KWG currently each hold 26½% (Freewest 47%).

Upon fulfilling the terms of the option, the parties (Freewest, Spider and KWG) will form a joint venture the decisions of which are to be made by a simple majority. On April 1, 2010,

management of the option was transferred to KWG for the period ending March 31, 2011, at which time it will revert to Spider.

Freewest is a wholly owned subsidiary of Cliffs Natural Resources Inc. (Cliffs). In addition Cliffs holds a 19.9% interest in KWG and has board representation.

1.2 LOCATION AND TENURE

1.2.1 Location and tenure

The SKF option encompasses 1,241 ha (78 claim units) in five staked and two single unit claim units the annual maintenance cost of which is $31,200. The claims were staked in 2003 and are not subject to dispute after their first anniversary. The property lies near the western margin the James Bay Lowland, 258 km west of Attawapiskat and 78 km east of Webequie, both remote First Nations communities.

1.2.2 Environmental and Permitting

There is no evidence of past activity on the property. The surface exploration work comprised cutting of grids, completion of geophysical and GPS surveys and helicopter-supported diamond drilling of 56 holes. The total area disturbed by drilling is about 1.35 ha. In 2009 AECOM was retained to commence baseline environmental studies comprising spring, summer and fall sampling at six sites on the three creeks that cross the property. The observations to be made will include water flow, electrophysical properties, chemistry and fish tissue sampling.

1.2.3 Accessibility, Climate, Local Resources, Infrastructure

The area is currently accessible by float or ski-equipped charter aircraft from Nakina, 280 km to the south or Pickle Lake, 310 km to the southwest.

1.2.4 Physiography

The property lies close to the western margin of the James Bay Lowland, an extensive, poorly drained area occupying a 400 km wide swath to the west of James Bay, and is locally underlain by unconsolidated marine clay.

1.2.5 Relief and Drainage

Relief across the Big Daddy claim is about 2 m, which is about 7 m above the Attawapiskat and Muketei drainages to the east and west respectively. Average relief over the Lowland is about 0.7 m/km.

1.2.6 Accessibility

The property lies 280 km north of the closest paved road at Nakina. Current access is by float and ski-equipped, charter aircraft from Nakina. Helicopters are required for local transport.

All-weather highways extend to Nakina (Highway 584) and Pickle Lake (Highway 808) where the gravel North Road extends a further 193 km to the Musselwhite mine, 290 km to the west of the property. The Ontario power grid reaches the Victor mine (De Beers), 157 km to the east and the Musselwhite mine (Goldcorp Inc.) to the west.

Canada Chrome Corporation, a subsidiary of KWG, has reported completion of geotechnical studies along a proposed rail corridor to link the area to the CN rail network near Nakina.

1.2.7 Climate

Mean temperatures range from -20°C in mid-winter to 15°C in mid-summer. Annual precipitation is about 70 cm, 70% of which falls during the summer. Snowfall peaks in early winter with accumulation reaching approximately 0.6 m by spring.

1.2.8 Vegetation

The area lies on the northern fringe of the boreal forest and is covered by extensive fen and bog complexes. Tree cover is highly variable, being dense along the better drained margins of major drainages where the major species are black and white spruce, and larch.

1.2.9 Fauna

While a wide range of animals and birds are reported, those observed include fox, wolf, marten, moose, black bear and caribou. The latter are a species at risk due to habitat loss in their southern range.

1.2.10 First Nations

The Marten Falls First Nation has asserted that the McFaulds Lake area falls within its traditional lands. Webequie, Fort Hope, and Lansdowne (like Marten Falls) are presently accessible only by air and may also benefit from potential transportation development.

The remote communities are small offering very limited employment and business opportunities. Comments by community leaders and elders indicate that the First Nations want to participate in development of the McFaulds area projects through direct employment, business opportunities and other potential revenue streams.

1.3 GEOLOGICAL OUTLINE

The area is underlain by the Sachigo greenstone belt of the Oxford–Stull Domain in the Sachigo Subprovince (Stott and Rainsford, 2006). Due to very limited mapping, extensive marine clay and Paleozoic platform cover, coupled with difficult access, current geological understanding of the area relies on airborne magnetic data supplemented by diamond drill holes.

The Sachigo belt comprises a narrow, 5 to 25 km wide, west-facing, arcuate belt of cresentic greenstone belts intruded to the north and west by granodiorite plutons (2727 to 2683 Ma, Rayner and Stott, 2005). The belt extends over a strike length of more than 100 km. The Sachigo belt appears to be wrapped around an older (circa 2.9 Ga) continental fragment.

Chromite, nickel-copper-PGE and iron-titanium-vanadium deposits in the McFaulds Lake are contained in phases of the large, mafic-ultramafic, magmatic complex, the Ring of Fire Intrusion. The known chromite deposits occur over a 13 km strike length of a narrow, steeply dipping, differentiated body, here termed the McFaulds Lake Sill. The principal nickel deposit (Eagle One) is reported to occur in a dyke lying a little to the west of and said to be a feeder to the sill. The Thunderbird iron-titanium-vanadium prospect is reported in ferrograbbos lying to the east of the sill and interpreted to be the more differentiated portion of the Ring of Fire intrusive complex.

The McFaulds Lake Sill is generally intruded along a northeast-trending granodiorite-volcanic contact. Evidence of the intrusive relationship comprises remnants of volcanics remaining between granodiorite and the body and the absence of blackwall alteration in the sill adjacent to the contact.

The Big Daddy segment of the sill is well-fractionated, comprising lower olivine-rich and upper olivine-poor units to the west and east respectively. Chromite occurs in the upper portion of the olivine-rich facies which culminates in the thick, massive Big Daddy chromite deposit. The upper contact between massive chromite and overlying, olivine-poor pyroxenite is sharp; Cr2O3 concentrations drop from ~40% to <1% within less than 1 cm.

Silicate minerals comprising the sill units have been pervasively altered by the addition of water forming serpentine, talc and chlorite. Despite pervasive and complete destruction of primary igneous minerals, original cumulate textures are faithfully preserved.

Diamond drilling on the Big Daddy claim shows that the sill comprises, from its base (northwest) to top (southeast), dunite, locally chromite-bearing peridotite, massive chromite, pyroxenite and gabbro. The latter is in intrusive contact with hanging wall volcanics and contained sediments. Correlation of units from hole to hole and section to section and occasional igneosedimentary structures (e.g., bedding) indicate that the sill has been rotated 90° from the original horizontal position so that the body now stands vertical or nearly so. In addition truncation geophysical features and the northward offset of the Black Creek deposit suggest that the sill is segmented and offset along a north-south trending left lateral fault

lying east of section 2100 E. A second fault may offset the west end of the deposit near section 1000 E.

The property lies near the western limit of the post-glacial Tyrrell Sea (ancestral Hudson’s Bay) and just west of the flat lying Paleozoic Hudson Bay Platform intersected in holes drilled to the east of the Big Daddy deposit. Pre-Silurian saprolite (tropically weathered material) is locally preserved. Deep weathering of the upper parts of the chromitite zone is likely of Pre-Silurian age.

1.4 DEPOSIT TYPE

The Big Daddy chromite deposit is a magmatic stratiform chromite deposit, similar in setting, form, mineralogy and dimensions to other chromite deposits found in layered mafic to ultramafic complexes. Examples of currently economic deposits occur in the Bushveld (South Africa), Great Dyke (Zimbabwe), Sukinda (Orissa, India), Kemi (Finland) and Ipuera (Brazil) complexes.

The most economically significant massive chromitite deposits occur as laterally extensive layers, typically a few decimetres to tens of metres thick. These deposits reflect fractional crystallization of chromite from mafic to ultramafic magmas precipitated due to either magma contamination or by mixing of magmas. Accessory disseminated chromite is also formed within the cooling magma chamber. Chrome contents range from a few percent Cr2O3 (in disseminated chromite) to more than 40% Cr2O3 (in massive chromite). The thicknesses of individual massive chromite bodies range from centimetres to more than 30 m (e.g., Big Daddy).

The ultramafic-mafic complex that hosts chromite deposits (Big Daddy, Black Creek, Black Thor/Black Label and Blackbird) also contains magmatic massive sulphide (Ni-Cu-PGE, e.g., Eagle One), vanadium (e.g., Thunderbird) and could host reef-type platinum-palladium deposits (not yet found in the McFaulds area).

1.4.1 Uses and Processing of Chromite

Chromite is the sole economic source for the metal chromium which is used in the manufature of stainless steel and in which it comprises about 18%. Minor amounts of chromite are used in the chemical and refractory industries.

Mines upgrade run-of-mine feed by crushing, sometimes grinding and gravity separation, to produce a range of products including lumpy chromite (+ 15 mm / -80 mm), chips and fines.

The mine product is upgraded by the reduction of pelletized material in submerged, electric arc furnaces to produce ferrochrome. Although the reduction process is energy intensive, major primary chromite producers tend to sell the ferrochrome product. The major ferrochrome producers are South Africa, Kazakhstan and India, however, Russian and Chinese production is increasing rapidly.

Both chrome ore and ferrochrome markets are sensitive to bulk composition which is reflected in both demand and price variations. The principal compositional/quality indicators of chromite ores and concentrates are their chrome to iron ratio (Cr2O3:Fe2O3 ) of two or better and with Cr2O3 at or exceeding 40%.

1.5 MINERALIZATION

The McFaulds Sill extends over more than 10 km from the Blackbird chromite deposit in the southwest to the Black Thor and Black Label deposits in the northeast. The Thunderbird vanadium deposits appear to occur in a separate but sub-parallel ferrogabbro sill to the east and northeast of Black Thor. Available descriptions suggest that the McFaulds Sill varies in character along its known length (Chance, P., personal communication, 2010). On the current property the sill is less than 200 m wide on sections 10+00 E and 11+00 E, where drilling has intersected both the footwall granodiorite and hanging wall volcanics. To the northeast, the sill is thicker (>400 m), and its contacts have not yet been intersected in drilling.

Chromite mineralization in the Big Daddy segment of the McFaulds Sill occurs within a 65 to 180 metre thick, peridotite interval which is stratigraphically above a dunite footwall and below a pyroxenite hanging wall. The lower contact of the main chromite layer tends to be gradational over a couple of metres while the upper is sharp.

Mineralized rock comprises sub-millimetre-diameter, idiomorphic, cumulate, chromite grains (e.g. Scoates, 2009). Mineralized intervals are a mixture of chromite and occasional olivine crystals set in a fine grained peridotitic matrix. At lower Cr2O3 concentrations chromite grains are disseminated through the host rock. As concentration increases, bedding becomes evident but disappears at the highest grades (>35% Cr2O3) due to uniform crystal size and absence of lower grade incursions or perturbations. The bulk of the Big Daddy mineralization occurs as massive chromite containing about 40% Cr2O3.

1.6 EXPLORATION

In the early 1990’s, following discovery of the Attawapiskat kimberlites, then joint venture partners Spider and KWG used recently published airborne magnetic maps to focus on kimberlite exploration. They quickly found the five Kyle kimberlites, which lie a few kilometres east of the Attawapiskat River and of McFaulds Lake. Those successes led to financing exploration of an 300 kilometre diameter area, centred on McFaulds Lake. In 2002, De Beers in the search for diamonds and using data optioned from Spider/ KWG, discovered copper-zinc mineralization – later identified by Spider/KWG as the McFaulds #1 deposit. In the following years, Spider tested similar geophysical targets in a broad arc extending south and west of McFaulds Lake. In 2006, Howard Lahti recognized a pair of thin chromite beds in ultramafic rocks in FW-06-03, drilled on the current property. A year later, Noront discovered the Eagle One Ni-Cu-PGE occurrence. In early 2008, Noront

discovered the Blackbird chrome deposit while testing an EM target a few kilometers southeast of Eagle One.

In late 2008, Spider and KWG with the aid of multiple sets of regionally extensive airborne data, re-evaluated the SKF property, drilling holes in search of Ni-Cu-PGE, chromite and platinum-palladium deposits. That work outlined the southwest end of the Big Daddy deposit, tracing mineralization over a 400 m strike length.

In early 2009 the J grid covering the Big Daddy project area was re-cut, re-chained and surveyed using gravity and magnetic methods. The new geophysical data showed a gravity anomaly extending and widening east of the known intersections to an apparent termination along a prominent creek to the northeast near line 2100 E. A strong magnetic anomaly lies adjacent and to the north of the gravity feature. In late 2009 and early 2010, a further 33 diamond drill holes were drilled at approximately 50 m intervals on surveyed lines spaced at 100 m apart over a 1,000 m strike length.

During the 2009-2010 campaign, recommendations made in an earlier NI 43-101 compliant report (Micon, 2009) were followed with respect to assessing the potential of the sill for chromite, base and precious metals, by testing remaining EM anomalies and improved quality and precision in the collection, processing and management of technical data, including implementation of a comprehensive QA/QC program for sampling and assaying.

1.6.1 Exploration Concept

Due to the paucity of outcrop and difficulty in traversing the swampy ground, exploration relies on airborne geophysical methods to generate preliminary geological maps. Ground geophysical surveys, typically carried out during the winter, provide additional detail and confirm target locations for drill testing. Since base metal sulphides conduct, EM is the preferred geophysical method. By contrast, chromite does not conduct but has a high specific gravity so gravity is effective for definition of drill targets. Finally PGE’s are present in amounts too small to alter the electrophysical properties of the host rock so drilling and detailed sampling of potential host lithologies is required.

The initial McFaulds Lake chromite deposits (Big Daddy and Blackbird) were discovered while testing EM conductors with coincident magnetic anomalies as potential massive sulphide deposits.

In retrospect prospecting (including airborne surveys) and government supported mapping had outlined several large layered mafic complexes (e.g., Big Trout Lake, Highbank Lake) to the west and south of McFaulds Lake. Alluvium and till sampling carried out by Spider in the mid-1990’s showed consistent ~15 km long chromium and chromite anomalies, lying parallel to the McFaulds Sill and the now known chromite deposits. In addition the sill outcrops at at least two locations; one on the current property and the other about a kilometer to the north on the Freewest property.

Serpentinization [hydration] of the dunite produces excess iron which forms magnetite, thus the altered olivine-rich, portion of the sill produces very strong total magnetic and highly variable vertical magnetic gradient anomalies. Locally, magnetite aggregates in the altered dunite to form narrow, highly conductive veinlets which produce a weak, diffuse but persistent airborne EM anomaly in the footwall of the Big Daddy, Black Creek and Black Thor/Black Label deposits.

Although the matrix of the massive chromitite is also pervasively altered to serpentine, talc and chlorite it lacks significant amounts of magnetite and is non-conductive, but, due to high density of chromite, has a high specific gravity that is measurable on the ground as a gravity anomaly.

1.6.2 Status of Exploration

Exploration completed to date is sufficient to define an indicated chromite resource. Substantial widths of massive chromite mineralization extend from the sub-outcrop, 3 to 10 m below surface, to the deepest intersection 365 m below surface. The deposit has been tested on 100 m sections between 900 E and 2100 E, a distance of 1,200 m.

The deposit remains open along strike and down dip. However, both gravity and magnetic anomalies diminish to the southwest near section 900 E and appear to be terminated along the creek to the northeast beyond section 2100E. Additional drilling and extension of gravity and magnetic coverage to the south property boundary are required. Drilling northeast of section 2100 E was not possible due to swampy conditions; however, geophysical data suggest that the chromite horizon is faulted 600 m left laterally (between sections 2100E and 2200E), becoming the Black Creek deposit on the north property boundary.

1.6.3 Exploration Results

Drilling results indicate that the bulk of the Big Daddy deposit consists of massive chromite averaging 40% Cr2O3 with Cr:Fe ratio of approximately 2. The thickness of the deposit is variable but averages 17 m and 12 m for the southwest segment (BD 1) and northeast segment (BD 2), respectively. Both segments of the deposit are open down dip.

1.7 MINERAL RESOURCES

The Big Daddy resource estimate has been conducted using geological modelling, conventional statistics, geostatistics, creation of interpolation parameters, block modelling, resource classification based on both geological, geostatistical and mineralization continuity and finally, block model validation.

The resource estimate was completed using Surpac Version 6.1.3 and is based on two scenarios.

Scenario 1: Focuses on high grade massive material that would produce a lumpy product comparable to South African products with little or no beneficiation.

Scenario 2: Defines a broad zone of mineralization to match the Kemi situation exploitable by open pit but requiring beneficiation to upgrade. The broad zone is constrained by a 15% Cr2O3 cut-off envelope but includes internal waste up to a maximum of 3.4 m.

The results of the resource estimate for both scenarios are summarized in Tables 1.1 and 1.2, respectively.

Table 1.1

Summary of the Big Daddy Massive Chromite Resources

Deposit/Code	Category	Cr2O3% Interval	Tonnes x 106	Avg. Cr2O3%	Cr/Fe Ratio
BD 1 (100)	Indicated	>35.0	12.934	40.74	2.0
		30.0 – 35.0	0.435	33.63	1.8
		25.0 – 30.0	0.017	28.87	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			13.4	40.49	2.0

BD 2	Indicated	>35.0	9.234	41.44	2.0
		30.0 – 35.0	0.520	32.83	1.8
		25.0 – 30.0	0.090	29.36	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			9.8	40.88	2.0

Grand Total	Indicated		23.2	40.66	2.0

BD 1 (100)	Inferred	>35.0	6.216	39.34	2.0
		30.0 – 35.0	1.014	33.25	1.8
		25.0 – 30.0	0.005	27.97	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			7.2	38.48	2.0

BD 2	Inferred	>35.0	8.382	40.24	2.0
		30.0 – 35.0	0.609	33.32	1.8
		25.0 – 30.0	0.047	28.35	1.7
		20.0 – 25.0	0.021	22.87	1.5
		15.0 – 20.0	0.042	16.76	1.1
		.01 – 15.0	0	0	0

Sub-total			9.1	39.57	2.0

Grand Total	Inferred		16.3	39.09	2.0

Note:

The tonnages have been rounded to 3 decimals for grade intervals and to 1 decimal for sub-totals and grand totals.

Table 1.2

Summary of the Big Daddy Chromite Deposit Mineral Resource @ 15% Cr2O3 Cut-off

Deposit/Code	Category	Cr2O3% Interval	Tonnes	Avg. Cr2O3%	Cr/Fe Ratio
BD 1 (100)	Indicated	>35.0	13.535	40.22	2.0
		30.0 – 35.0	1.333	32.98	1.8
		25.0 – 30.0	0.447	27.77	1.7
		20.0 – 25.0	0.152	23.34	1.5
		15.0 – 20.0	0.019	17.81	1.1
		0.01 – 15.0	0.001	12.09	0.7
Sub-total			15.5	39.05	2.0

BD 2	Indicated	>35.0	9.622	41.11	2.0
		30.0 – 35.0	1.031	32.97	1.8
		25.0 – 30.0	0.190	28.04	1.7
		20.0 – 25.0	0.007	22.56	1.4
		15.0 – 20.0	0.009	18.46	1.2
		0.01 – 15.0	0.087	7.74	0.6
Sub-total			10.9	39.82	1.9

Grand Total	Indicated		26.4	39.37	2.0


BD 1 (100)	Inferred	>35.0	7.097	39.14	2.0
		30.0 – 35.0	1.877	32.94	1.8
		25.0 – 30.0	0.543	27.93	1.7
		20.0 – 25.0	0.349	22.58	1.4
		15.0 – 20.0	0.174	18.33	1.1
		0.01 – 15.0	0.016	9.17	0.6
Sub-total			10.1	36.40	1.9

BD 2	Inferred	>35.0	8.993	39.80	2.0
		30.0 – 35.0	0.986	32.89	1.8
		25.0 – 30.0	0.241	28.06	1.7
		20.0 – 25.0	0.123	23.11	1.5
		15.0 – 20.0	0.059	16.90	1.0
		.01 – 15.0	0.014	11.96	0.9

Sub-total			10.4	38.51	2.0

Grand Total			20.5	37.47	1.9

(Includes internal waste within the 15% Cr2O3 envelope).

Note:The tonnages have been rounded to 3 decimals for grade intervals and to 1 decimal for sub-totals and grand totals.

approvals, regulatory or otherwise for the project. Other future setbacks may include aboriginal challenges to title or interference with ability to work on the property and lack of efficient infrastructure. There are currently no mineral reserves on the Big Daddy property and there is no assurance that the project will be placed into production.

1.8 INTERPRETATION AND CONCLUSIONS

1.8.1 Exploration Concept

Since 2006, the SKF personnel have employed a combination of geophysical techniques involving magnetic, electromagnetic and gravity surveys to determine the extent and rough geometry of the Big Daddy chromite mineralization prior to evaluation by drilling. This worked well, and has reduced the amount of drilling required to delineate the Big Daddy deposit.

1.8.2 Geology and Mineral Resources

The Big Daddy deposit is tabular as is typical of stratiform chromite deposits hosted by mafic-ultramafic layered intrusions. The tabular geometry and the continuity of the massive chromite intersections from hole to hole and section to section have facilitated delineation of the deposit using relatively wide hole spacing. Three to four holes were drilled along sections cut at 100 m intervals so that collars were 50 or 100 m apart. The sections extend over a 1,200 m strike length of which approximately 1,000 m is continuously mineralized. The current drill density is sufficient to estimate an Indicated resource over part of the deposit (using parameters defined for the NI 43-101 standard). The consistency and persistency of the deposit as revealed by variographic analysis implies that only very limited additional drilling will be necessary to upgrade the Indicated resource to the Measured category.

The two segments of the Big Daddy deposit (BD 1 and BD 2) remain open at depth but the lateral extents are unlikely materially to exceed the already established limits. Micon suggests that a few strategically positioned drill holes will upgrade the bulk of the Indicated resource to the Measured level.

1.8.3 Metallurgy

The preliminary metallurgical investigations completed to date are inconclusive. However the Big Daddy deposit consists of remarkably uniform, massive, high grade chromite with a favourable Cr:Fe ratio from which a lumpy product may be readily produced and should satisfy a broad market. Future work should focus on quantifying the product quality.

1.8.4 Market Outlook

Chromite is the source of chromium which is used in a wide range of applications in metallurgy, refractory materials and chemicals. The principal end uses are in stainless steel which accounts for approximately 94% of output of chromite, and non-ferrous alloys.

Potential new sources of supply will be evaluated in relation to the geographical location of potential markets and product quality.

1.8.5 Project Objectives

Micon is satisfied that the overall project objectives as detailed in the previous Micon technical report (2009) have been met in a highly efficient and cost saving manner. The next major challenge will be to bring the property into production; prior to which additional technical and economic studies will be required.

1.9 RECOMMENDATIONS

1.9.1 Further Assessment of Chromite Resources

Spider and KWG have established a firm resource base upon which to proceed with prefeasibility studies. However, in order to advance the project to prefeasibility level, it is critical to complete sufficient metallurgical investigations to establish the product quality of the massive chromite and the optimum beneficiation process for the disseminated/lower grade mineralization.

Whilst additional resources may be discovered by deeper drilling, Micon believes that the optimal economic depth for mining should be determined before such drilling is undertaken. Thus in the short to medium term, additional drill programs are not a priority.

In view of the foregoing, Micon makes the following recommendations:

i.		Detailed metallurgical work needs to be completed to enable prefeasibility studies to commence. The investigations should primarily focus on the establishment of product quality/recovery relationships and the marketing potential of the Big Daddy chromite concentrates.

ii.		Detailed mineralogical work should be conducted simultaneously with metallurgical investigations so as to elucidate chromite grain liberation characteristics, chromite grain chemistry and gangue mineralogy.

iii.		A prefeasibility study should be conducted at the conclusion of metallurgical /mineralogical investigations, if warranted.

In addition to the above, a basic but detailed survey of the infrastructural requirements should be initiated taking into account the possible synergies from cooperation with third parties holding prospective mining rights in the McFaulds Lake area.

If prefeasibility studies are favourable, Micon recommends that infill drill holes as indicated on Figure 17.9 be drilled to upgrade the resource. Additional holes to increase the resource are not marked on Figure 17.9 but can be designed and drilled if warranted. In view of the

remoteness and lack of infrastructure of the SKF project area, the overall (global) size of the deposit will impact significantly in any future investment decision making process.

1.9.2 Follow-up on Unexplained EM anomalies

Whilst current exploration efforts are on chrome, the potential for other deposit types should not be overlooked, particularly Magmatic Massive Sulphides (MMS) deposits of Ni-Cu-PGE (which might occur in the same peridotite unit hosting the chrome mineralization) and Volcanogenic Massive Sulphides (VMS) deposits (Cu-Zn-Au) in the eastern segment of the SKF project area. Freewest’s and Noront’s MMS discoveries in peridotite (see Section 15) lend support for continued follow-up work on EM conductors.

In line with these recommendations, Spider/KWG have proposed the following two-phased budget (Table 1.3)

Table 1.3

Summary of Budget Proposals for the Big Daddy Chromite Project

Phase	Description of Activity/Program	Estimated. Cost($)
1 a	Geometallurgical studies involving mineralogical and microprobe work	50,000
1 b	Metallurgical testing including allowance for drill holes to get metallurgical	500,000
	sample
1 c	Infrastructural study	50,000
1 d	Prefeasibility/scoping study	100,000
	Contingency on phase 1 activities (about 10% of totals 1 a to 1 d)	70,000
	Sub total Phase 1	770,000

2	Diamond drilling	4,000,000
	Contingency on phase 2 activities	400,000
	Sub-total phase 2	4,400,000

1 & 2	Grand total	5,170,000

Micon has reviewed Spider/KWG’s budget proposals and recommends that Spider/KWG conduct the proposed activities subject to funding and any other matters which may cause the proposals to be altered in the normal course of their business activities or alterations which may affect the program as a result of exploration activities themselves.

2.0 INTRODUCTION

2.1 AUTHORIZATION AND PURPOSE

At the request of Messrs. Neil Novak and James Burns, President and VP Exploration of Spider Resources Inc. (Spider), respectively, and Messrs. Frank Smeenk and Maurice (Moe) Lavigne, President and VP Exploration and Development of KWG Resources Inc. (KWG), respectively, Micon International Limited (Micon) has been retained to complete a mineral resource estimate of the Big Daddy chrome deposit. Spider and KWG require an independent Technical Report to fulfill the requirements of Canadian National Instrument (NI) 43-101 for a first time disclosure of the Big Daddy mineral resources.

Micon’s independent Qualified Persons responsible for the preparation of this report are Richard Gowans, P.Eng., Jane Spooner, MSc., P. Geo., Alan San Martin, MAusIMM and Charley Murahwi, M.Sc., P. Geo., MAusIMM. The report has been compiled following the format and guidelines of Form 43-101F1, Technical Report for National Instrument 43-101 (NI 43-101), Standards of Disclosure for Mineral Projects, and its Companion Policy NI 43- 101CP. All members of the Micon team are independent of Spider and KWG as defined in NI 43-101.

This report is intended to be used by Spider and KWG subject to the terms and conditions of their contracts with Micon. Those contracts permit Spider and KWG to file this report on SEDAR (www.sedar.com) as an NI 43-101 Technical Report with the Canadian Securities Regulatory Authorities pursuant to provincial securities legislation. Micon understands that Spider and KWG may use the report for a variety of corporate purposes including financings. Except for the purposes legislated under provincial securities laws, any other use of this report, by any third party, is at that party’s sole risk.

2.2 BACKGROUND

In this report Big Daddy (Figure 2.1) refers to the chromite deposit situated on claim P 3102253. SKF (Spider-KWG-Freewest) refers to the relationship between Spider, KWG and Freewest Resources Canada Inc. (Freewest) as described in the September, 2009 option agreement to which each party is a signatory.

Spider and KWG have recently completed a diamond drilling program which has outlined substantial thicknesses of high grade chromite mineralization extending over a 1,200 m strike length to a maximum depth of about 365 m below surface. Under the current option agreement, Spider and/or KWG can earn an additional 10% interest in the property through minimum annual exploration expenditures of $5 million over three years ending March 31, 2012. The additional 10% interest may also be gained through minimum exploration expenditures of $5 million and delivery of a positive feasibility study to Freewest (the property vendor) by March 31, 2012.

In January, 2009, Spider and KWG commissioned Micon to review exploration results obtained to that date and to make recommendations regarding the most expeditious means to advance the project and to generate a complete and reliable data set on which to base additional work. The report, dated March 31, 2009, and entitled “NI 43-101 Technical Report on the Big Daddy Chromite Deposit and Associated Ni-Cu-PGE, James Bay Lowlands, Northern Ontario” has been filed on SEDAR by both Spider and KWG. Micon recommended:

	·	A combination of ground gravity and magnetic surveys to guide drilling.

	·	A two phase drilling program designed to establish the extent and character of the deposit and then generate detailed information required to support a resource estimate.

	·	Thorough investigation of PGE potential.

	·	Geophysical definition and drill testing of unexplained conductors (VMS and Ni-Cu- PGE targets).

In addition Micon recommended adoption of a comprehensive QA/QC program with respect to sampling and analyses, implementation of more a comprehensive logging program to include collection of geotechnical observations, and improved down-hole directional surveying. Ancillary metallurgical and petrographic studies were recommended. The immediate objective of this work was to outline a significant chromite resource while completing a thorough evaluation of the potential for PGE’s in the hanging wall of the chrome deposit and massive Ni-Cu-PGE-bearing sulphides elsewhere.

Micon noted that:

“due to remoteness and lack of infrastructure the overall (global) size of the deposit will impact significantly in any future investment decision-making process”.

2.3 SOURCES OF INFORMATION

The sources of information for this report are detailed below, and include those in the public domain as well as privately acquired data.

	·	Data and transcripts supplied by and at the instruction of Spider/KWG.

	·	Patrick Chance, P. Eng., was a project manager from early October, 2009 until March 31, 2010 and was on site during part of the 2009 and for the entire 2010 drilling campaign. He assembled the drill hole database, and implemented and supervised implementation of systematic data collection procedures.

	·	Review of various geological reports and maps produced by the Ontario Geological Survey (OGS), its predecessors, and the Geological Survey of Canada (GSC).

	·	Discussions with Spider/KWG management and Billiken Management Services (Billiken) staff, consultants and contractors familiar with the property.

	·	Research of technical papers produced in various journals.

	·	Independent analyses of quartered core samples.

	·	Independent repeat analyses of sample pulps (assay splits).

	·	Personal knowledge of Cr and Ni-Cu-PGE in layered intrusions and similar geological environments.

Micon is pleased to acknowledge the helpful cooperation of Spider/KWG’s management and Billiken, the project contractor, whose staff and management made any and all data requested available and responded openly and helpfully to all questions, queries and requests for material.

2.4 SCOPE OF PERSONAL INSPECTION

Micon (represented by Charley Murahwi) has twice inspected the property (Claim P 3102253) and the McFaulds Lake camp, where core was logged and processed and is stored; first, between January 11 and 13, 2009, and again on October 22, 2009. In addition, Murahwi visited the Activation Laboratory’s sample preparation and analytical facility in Thunder Bay on January 10, 2009, selecting pulps for re-analysis.

During the initial visit the following activities were completed:

	·	Review of QA/QC (including sample security) procedures.

	·	Verification of drill hole collar positions and mineralization intercepts in drill cores.

	·	Selection of sample pulps (assay splits) for repeat analyses.

	·	Independent sampling of quarter drill core samples.

During the second visit Micon confirmed that recommendations of the earlier report had been implemented and that the data collected were of a quality, detail and form required to support resource estimation and subsequent technical studies.

Figure 2.1

Location Map of the Big Daddy Chromite Deposit

2.5 ABBREVIATIONS

The abbreviations used in this report are summarized in Table 2.1

Table 2.1

Summary of Abbreviations Used

Unit(s) of Measurement	Abbreviation	Name	Abbreviation
Average	Avg	Activation Laboratories	Actlabs
Above sea level	ASL	Billion years	Ga
Centimetre(s)	cm	Big Daddy Deposit	BD
Coefficient of variation	Coef. Var	Big Daddy Deposit southwest segment main mass	BD 1
Degree(s)	o	Big Daddy Deposit northeast segment main mass	BD 2
Degrees Celsius	oC	Big Daddy Deposit southwest segment subsidiary body	BD 1 sub
Digital elevation model/Digital Terrain Model	DEM/DTM	Big Daddy Deposit northeast segment subsidiary body	BD 2 sub
Electro-magnetic(s)	EM	Canadian Institute of Mining, Metallurgy and Petroleum	CIM
Gram(s)	g	Canadian National Instrument 43-101	NI 43-101

Unit(s) of Measurement	Abbreviation	Name	Abbreviation
Grams per metric tonne	g/t	Diamond drill hole	DDH
Greater than	>	End of hole	EOH
Hectare(s)	ha	Eurasian Natural Resources Corp	ENRC
Inverse distance	ID	Geological Survey of Canada	GSC
Inverse distance cubed	ID3	Global Positioning System	GPS
Kilogram(s)	kg	Horizontal Loop Electromagnetic survey	HLEM
Kilometre(s)	km	International Chromium Development Association	ICDA
High intensity magnetic separation	HIMS	International Stainless Steel Forum	ISSF
Heavy liquid separation	HLS	Magmatic Massive Sulphide	MMS
Induced polarization	IP	Marten Falls First Nation	MFFN
Loss on ignition	LOI	Micon International Limited	Micon
Low intensity magnetic separation / Laboratory Information Management System	LIMS	Ontario Department of Mines	ODM
Maximum	max	Ontario Geological Survey	OGS
Metre(s)	m	Parts per billion	ppb
Milligram	mg	Parts per million	ppm
Millimetre	mm	Platinum Group Elements/Metals	PGE/M
Million tones	Mt	Qualified Person	QP
Million / Billion years	Ma / Ga	Quality Assurance/Quality Control	QA/QC
Minimum	min	Net Smelter Return	NSR
North American Datum 1983	NAD’83	Noront Resources Limited	Noront
Ordinary kriging	OK	Not available/applicable	n.a.
Percent(age)	%	Ring of Fire	ROF
Rock quality designation	RQD	Ring of Fire Intrusion	RFI
Specific gravity	SG	Standard Reference Material	SRM
Standard deviation	Std	System for Electronic Document Analysis and Retrieval	SEDAR
Système International d’Unités	SI	Time Domain Electro Magnetic survey	TDEM
True thickness	T.T.	Volcanogenic Massive Sulphide	VMS
Universal Transverse Mercator	UTM	Webequie First Nation	WFN
Very low frequency	VLF	Measured Resource	MR
Wet high intensity magnetic separation	WHIMS	Indicated Resource	IR
		Inferred Resource	Inf. R
		Whole rock assay	WRA

3.0 RELIANCE ON OTHER EXPERTS

The authors are Qualified Persons only in respect of the areas in this report identified in their “Certificates of Qualified Persons” submitted with this report.

Micon has reviewed an executed copy of the September 10, 2009 option agreement between Spider, KWG (optionors) and Freewest (vendor) but has not verified the legality of any underlying agreement(s) that may exist concerning the licenses or other agreement(s) between third parties. Thus Micon offers no legal opinion as to the validity of the mineral titles claimed. The description of the property, and ownership thereof, as set out in this report, is provided for general information purposes only.

The existing environmental conditions, liabilities and remediation have been described under the relevant section as per the NI 43-101 requirements. However, the statements made are for information purposes only and Micon offers no opinion in this regard.

The general descriptions of geology and past exploration activities used in this report are taken from transcripts prepared by Spider staff/consultants and from reports prepared by various reputable companies or their contracted consultants, as well as from various government and academic publications. Micon has relied on these data, supplemented by its own observations at site.

While exercising all reasonable diligence in checking, confirming and testing it, Micon has relied upon the Spider’s presentation of the project data from previous and recently completed exploration programs.

4.0 PROPERTY DESCRIPTION AND LOCATION

4.1 SIZE, LOCATION AND TENURE

The Big Daddy chromite deposit lies entirely on mining claim P 3012253 situated in the McFaulds Lake area of the James Bay Lowlands of north-central Ontario. P 3012253 is the westernmost of a seven-claim, 1,241 ha property under option from Freewest by Spider and KWG (SKF option).

The SKF property lies in NTS 43D16S½ near 86° 14' 11" W longitude, 52° 45' 32" N latitude. The area is situated 280 km due north of the town of Nakina and 258 km due west of the James Bay coastal community of Attawapiskat. The option property lies 13 km westsouthwest of the McFaulds Lake camp which is situated on the northwest corner of the lake.

The property comprises five staked claims (P 3012252, P 3012253, P 3008268, P 3008269 and P 3008793) and two single-unit, (400 m x 400 m, 16 ha) blocks excised from adjacent staked claims (P 3012250 and P 3012251) to the north (Figure 4.1) encompassing a total of 1,241 ha (78 claim units). Claim abstracts are summarized in Table 4.1.

Claim boundaries were marked out by stakers. James Burns, VP Exploration of Spider, has walked the claim lines recording the locations of lines and posts with a hand-held, retail grade, GPS.

The property is in good standing until April and August, 2011. Annual assessment requirements are $31,200. Claim abstracts currently report Freewest as the recorded holder; however, the property is to be held by KWG in trust.

As of September, 2009 both Spider and KWG had earned a 25% interest (Freewest 50%) in the property. Spider and KWG’s exploration expenditures in late 2009 and early 2010 each exceed the $2.5 million required to earn an additional 1½% interest. As of March 31, 2010 the property interests are Spider 26½ %, KWG 26½ % and Freewest 47%.

The two westernmost claims and both contiguous single units are subject to a 2% Net Smelter Return royalty currently held by Richard Nemis (1%) and KWG (1%).

Table 4.1

SKF Property – Summary of Claim Abstracts as of March 19, 2010

(Freewest is the recorded holder of these claims. Claim abstracts are available at

www.mci.mndm.gov.on.ca/claims)

Claim No	Units	Area (ha)1	Due Date	Recorded	Work Req’d	Total Work	Total Reserve	Present Work Assigned	NSR
P 3012253	16	249	2011-Apr-22	2003-Apr-22	$6,400	$38,400	$152,334	$30,786	2%
P 3012252	16	258	2011-Apr-22	2003-Apr-22	$6,400	$38,400	$0		2%
P 3008269	16	257	2011-Aug-11	2003-Aug-11	$6,400	$38,400	$33,429	$60,945	0%
P 3008793	12	202	2011-Aug-11	2003-Aug-11	$4,800	$28,800	$0	$0	0%

Claim No	Units	Area (ha)1	Due Date	Recorded	Work Req’d	Total Work	Total Reserve	Present Work Assigned	NSR
P 3008268	16	243	2011-Aug-11	2003-Aug-11	$6,400	$38,400	$20,203	$24,000	0%
	76	1,209				$182,400	$205,966	$115,731
P 30122502	1	163	2011-Apr-22	2003-Apr-22	$6,400	$38,400	$10,560	$0	2%
P 30122512	1	163	2011-Apr-22	2003-Apr-22	$6,400	$38,400	$10,560	$0	2%
		32				$76,800	$21,120
	78	1,241

1 – Measured based on uncorrected, hand-held GPS-derived locations of claim [corner] posts.

2 - Assessment work is for entire claim which must be maintained to retain the optioned portions.

3 – Nominal areas based on descriptions of the optioned parcels and locations of relevant claim [corner] posts

Figure 4.1

SKF Project Claim Map. SKF Option claims are shown in green. Claim locations are “as staked” based

on GPS-derived locations of claim posts

4.2 COSTS OF MAINTENANCE

In Ontario, mining rights are acquired by staking out and recording claims in a manner prescribed in the Mining Act (R.S.O. 1990, Chapter M. 14 Section 38 (1)). Claim holders are required to submit proof of permitted exploration expenditures at a rate of $400 per claim unit annually starting prior to the second anniversary of recording until the claims are taken to lease. The annual maintenance costs for 78 units are $31,200. Sufficient eligible work has

been completed to retain the property in good standing for many years. An assessment report of recent drilling is in preparation.

4.3 ROYALTIES AND PROPERTY RIGHTS

4.3.1 4.3.1 Underlying Agreements

On 22 April, 2003, Richard Nemis became the recorded holder of six, 16-unit claims (the Nemis Claims), comprising the western two SKF Option claims (P 3012252 and P 3012253) and the four adjoining claims to the north that now comprise the Black Thor (Freewest, 100%) property (shown in pink on Figure 4.1).

On June 17, 2003, Richard Nemis agreed to sell 100% interest in the Nemis Claims to Freewest in consideration of a payment of $10,800 and a 2% NSR royalty. The claims were transferred to Freewest on August 14, 2003.

On August 11, 2003, Freewest caused the three claims that comprise the east part of the SKF property (P 3008269, P 3008793 and P 3008268) to be recorded.

On December 5, 2005, KWG and Spider, as equal partners, agreed to earn a 50% interest in Freewest’s property comprising P 3012253, P 3012252, P 3008269, P 3008793 and P 3008268 together with two single claim units (~32 ha) excised from adjoining Freewest claims 302250 and 3022251 for exploration expenditures of $1,500,000 by October 31, 2009 of which $200,000 was to be spent by February 28, 2006. The addition of the two single units permits Spider and KWG to test two EM conductors that extend northwards onto the Black Thor property.

In March, 2009, Freewest, KWG and Spider entered into a letter agreement which forms the basis for the September 10, 2009 agreement described below.

On July 21, 2009, Nemis, Freewest and KWG entered an agreement whereby KWG purchased half of the Nemis NSR (i.e., 1% NSR royalty) which was conveyed to 7207565 Canada Inc., a subsidiary of KWG.

On September 10, 2009, Freewest, KWG and Spider amended and restated the December 5, 2005 agreement, allowing KWG and/or Spider to earn a combined additional 10% interest in the property through annual expenditures of $2,500,000 each within three years ending March 31, earning 3% in each of the first two years and 4% in the last year ending March 31, 2012. The additional 10% may also be earned should one or both parties spend a minimum of $5,000,000 and deliver a positive feasibility study to Freewest by March 31, 2012.

Title of the property was to be transferred to KWG to be held in trust. That has not yet occurred.

The September, 2009 agreement acknowledged that KWG and Spider had already each earned a 25% interest in the property and warranted that there were no encumbrances on the property beyond the NSR royalty.

Spider has operated the project from inception until March 31, 2010. KWG is to be operator for the year beginning April 1, 2010, with operatorship reverting to Spider during the following year, subject to conditions, after which a joint venture of the three parties is to be formed at which an operator is to be appointed by a simple majority.

4.3.2 Royalty Interests

Richard Nemis and KWG Resources each hold a 1% Net Smelter Return royalty on claims P 3012252, P 3012253 (Big Daddy deposit), and the adjoining single unit portions of P 3012250 and P 3012251.

4.3.3 Other Parties to the Agreement

Freewest Resources Canada Inc. is a wholly owned subsidiary of Cliffs Natural Resources Inc. KWG Resources Inc. is a junior exploration company in which Cliffs Natural Resources holds ~19.9% interest and has board representation.

4.4 ENVIRONMENTAL AND PERMITTING

There are no known environmental liabilities associated with the SKF property. No mining or other potentially disruptive work has been carried out on the current property beyond that described in this report. Current legislation (chiefly the Mining Act) does not require permitting of the early stages of exploration (e.g, ground geophysics, prospecting and drilling).

4.4.1 Current Status

Surface exploration to date has comprised line cutting of several grids, conducting magnetic, HLEM, gravity and PEM surveys over portions of the property and the drilling of 56 diamond drill holes. The drilling was supported by helicopter resulting in minimal ground disturbance (approximately 1.35 ha in total). At the cessation of the 2010 drilling campaign all foreign materials including containers, drill parts and garbage were removed. A final walkover is required in snow-free conditions.

On about January 20, 2010, Chief Elijah Moonias of the Marten Falls First Nation reported his community’s concerns regarding the use of ice strips and the protection of caribou. Studies into the impacts of ice roads on fish and mammal populations carried out to the north of Yellowknife and elsewhere were unable to detect measureable impacts (e.g. Moulton et al., 2003).

The woodland caribou and wolverine are listed as species at risk in Ontario. Caribou tracks are plentiful during the winter, although sightings are rare.

In February, 2010, representatives of relevant federal, provincial and municipal regulatory agencies inspected the camp facilities at McFaulds Lake and were invited to visit the work site. The few concerns related to the camp site and have been addressed by Billiken, the camp owner.

4.4.2 Baseline Line Environmental Studies

In 2009, Spider, as project manager, retained AECOM, formerly Gartner-Lee, to initiate baseline environmental studies. AECOM established pairs of observation stations on the three drainages that cross the property, sited up and down-drainage of the property.

During 2009, AECOM completed spring, summer and fall sampling programs, measuring water flow, quality and physiochemical parameters. Biological (tissue) sampling was also undertaken.

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE

AND PHYSIOGRAPHY

5.1 PHYSIOGRAPHY

The Big Daddy (average elevation 173 m) property lies near the western limit of the Hudson Bay Lowlands, a vast, poorly-drained area extending along the south and west coasts of James and Hudson Bays between the Ontario-Quebec boarder and Churchill, Manitoba (e.g., Brookes, 2010). The area corresponds with the maximum extent of periglacial marine inundation (to 180 m) by the ancient Tyrrell Sea and with that of the western margin of the Hudson Bay Platform. The Platform comprises Lower Paleozoic carbonates and clastics sediments. Remnants of the Paleozoic platform cover strata were reported in drill holes FW- 06-04 and FW-08-11, which are collared within 200 m of the chromite sub-outcrop, as well as in holes drilled to the east of the Big Daddy deposit.

Sjörs (1959) describes four distinct landscape features; fens, bogs, black spruce islands and riparian zones. All are evident on the Big Daddy claim.

	·	Fens are the basic landscape feature characterized by shallow, typically circular ponds, relatively diverse vegetation, higher pH and metal contents.

	·	Bogs comprise island-like, thick sphagnum accumulations (~3 m) above the local surface with irregular, 1.5 m-deep ponds that form string bogs where gradients are steeper. Plant diversity is low due to acid, nutrient-poor water.

	·	Ovoid, black spruce islands are elevated 2 m above the surrounding area, commonly with treeless centres. Sjörs (ibid.) encountered frozen ground a metre or so below surface.

	·	The riparian zone comprises river banks including the area subject to seasonal flooding. Nutrient availability and locally good drainage contribute to a diverse flora including, locally, mature spruce and aspen.

5.2 RELIEF AND DRAINAGE

Big Daddy project area lies in the Attawapiskat drainage system which consist of one of the two great rivers (the other being the Albany) that drain northwestern Ontario. These provided convenient access for early explorers and traders. Drainage over the Lowlands is very poor due to the gentle slope (approximately 0.7 m / km).

Relief across the Big Daddy claim is about 4 m, and as much as 7 m above the closest points on the Muketei and Attawapiskat rivers. Water flow along creeks and rivers varies from a maximum in the spring falling gradually until the following spring. During the remainder of the year even local rainfall rapidly reaches the major drainages causing slight increases in water level.

The Big Daddy claim drains to Black Creek which straddles the east claim boundary. From there drainage is north-northwest towards the Muketei river.

5.3 ACCESSIBILITY AND INFRASTRUCTURE

The area is remote lying far from the nearest paved road at Nakina, 280 km to the south. A power line and road also serve the Musselwhite mine (Goldcorp Inc.) 280 km to the west over much better drained terrain. The area is currently accessible only by float and ski- quipped aircraft which can land on larger lakes. Aircraft are available in Nakina and Pickle Lake. Helicopters are essential for local transport, although skidoos and larger tracked vehicles are useful when the ground is frozen and there is sufficient snowpack.

Nakina has a paved 3,500 foot (about 1,000 m) runway. The main transcontinental CN rail line also passes through the town. Longer runways are available at Geraldton, (5,000 feet (about 1,500 m), 337 km south) and Pickle Lake (4,500 feet (about 1,400 m), 310 km southwest).

Thunder Bay (540 km south-southwest) is the regional centre with daily air service to the remote communities, Nakina and Pickle Lake. Although the Ministry of Northern Development, Mines and Forestry’s (MNDM&F’s) development coordinator is based in Thunder Bay, the area lies in the Porcupine Mining Division and is administered from Timmins (about 600 km southeast).

All-weather highways extend to Nakina (Highway 584) and Pickle Lake (Highway 808) from where the gravel North Road extends 193 km to Opapimiskan Lake (Musselwhite mine) to the west.

The Ontario power grid reaches the Victor mine (DeBeers Canada Inc.), 157 km to the east, Nakina, 280 km to the south and the Musselwhite mine 290 km to the west.

During 2009 Marten Falls Logistics began construction of an airstrip about four kilometers north of Noront’s Esker camp. Work is reported as halted due in part to permitting issues.

In 2009 KWG through its subsidiary Canada Chrome Corporation, staked two “rail corridors”. Subsequently Canada Chrome Corporation commenced a scoping study pertaining to costs for a rail link to the McFaulds Lake area. The company has completed a geotechnical, soil sampling program along a 340 km corridor to the area from the CN railway line at Exton near Nakina. Feasibility level engineering studies and cost estimates for a rail link are expected to be completed by the end of 2010 (M.J. Lavigne, personal communication, 2010).

5.4 CLIMATE

Mean temperatures range from -20°C in December and January to a peak of 15°C in July (Figure 5.1). Annual precipitation is about 70 cm, of which almost 70% falls as rain with peak amounts during July. Snowfall peaks in November gradually diminishing to March. Typical snow accumulations are about 0.6 m.

Figure 5.1

Annual Mean Daily Temperature and Range, January to December (month 1 to 12)

(Upper curves, left scale) and monthly precipitation (lower curves, right scale) showing rain (blue curve)

and snow (grey curve for Pickle Lake (1971-2010 data; source: www.climate.weatheroffice.gc.ca).).

5.5 VEGETATION

The property lies in a broad transition zone between the boreal forest and arctic tundra further north. It is covered by extensive fen and bog complexes with highly variable tree cover intermixed with vast numbers of ponds and lakes. The principal tree species include black spruce (Picea mariana), white spruce (Picea glauca) and tamarack (Larix laricina) (Sjörs, 1959). Caribou grazing locally alters plant community structure (Proceviat et al., 2001).

5.6 FAUNA

While a wide range of animals and birds are reported, those observed include fox, wolf, marten, moose, black bear and woodland caribou. The area lies in the northern range of the woodland caribou, a species at risk in its southern range due to habitat loss (removal of ldgrowth, boreal forest; Proceviat et al., 2001).

“Winter survival of woodland caribou in the black spruce peatlands of northeastern Ontario also appears to be dependent on the availability of ground and arboreal lichen and arboreal

lichen biomass has been shown to be an important parameter identifying late winter habitat selected by this species.” (ibid.)

Despite intermittent aerial surveys since 1950, the abundance and migration patterns of the lowland woodland caribou population are not well understood (Magoun et al, 2005).

5.7 FIRST NATIONS

First Nations communities are the principal permanent settlements in the far north of Ontario. Although the mineral rights were surrendered in the James Bay Treaty No. 9 in the early 20th century, recent court rulings combined with the absence of economic opportunity in the region have encouraged First Nations to assert rights to traditional lands. The Marten Falls First Nation asserts that the McFaulds area and KWG’s currently proposed access corridor lie within its traditional lands. It is likely that other nearby communities (e.g., Webequie, Fort Hope, Lansdowne House and Summer Beaver) will seek economic advantage from developments in the area.

Prior to 2010 mineral exploration companies acted individually, reaching accommodations and in some cases agreements with First Nations. In early 2010, the Marten Falls First Nation with the support of the Webequie First Nation initiated a logistics blockade of Koper and McFaulds Lakes between January 20 and March 18. While the objectives of the blockade are unclear, the need for sustained engagement to structure development of and eventual mutually-beneficial operations in the area is clear.

The closest communities are members of the Matawa Tribal Council which represents Oji- Cree communities in an arc along the west edge of the James Bay Lowland from Constance Lake in the southeast to Neskantaga First Nation (Lansdowne House) in the northwest. The population of the remote communities is about 3,000 (2006 data; www.matawa.on.ca). The remaining 5,000 Matawa members live off reserve or in road accessible communities around Nakina, Long Lac and Hearst.

During the most recent Big Daddy drill campaigns, a third of the workforce comprised First Nations members. Geotechnical logging, down-hole and GPS surveys and all sampling were carried out to a high standard by First Nations members under supervision of the site geologist.

5.8 LOCAL RESOURCES

Few local resources have been identified to date. In particular there is little evidence of aggregate an essential commodity for mine and infrastructure development.

There is sufficient space on the current property to develop a mine and ancillary installations.

6.0 HISTORY

There is no evidence that the current property had been staked or otherwise explored prior to 2003, however, Spider/KWG and others had conducted diamond exploration in the area since the early 1990’s.

Government survey agencies have carried out very limited, largely reconnaissance work in the area due to the perceived lack of outcrop and the high cost of supporting field programs. Prior to the 1990’s there are few records of past exploration beyond a flurry of diamond drilling to the north and west of the current area in the early 1970’s following the Kidd Creek (Timmins) VMS discovery.

6.1 GENERAL

Robert Bell (1886) provides the earliest account of the geology of the Attawapiskat and tributaries describing well-exposed Paleozoic stratigraphy along the river and including initial description of Archean rocks exposed in the headwaters of the river. McInnes (1910) travelled along the upper Attawapiskat and adjacent Winisk rivers a quarter century later. During the 1940’s the Provincial Government investigated the lignite, gypsum and petroleum possibilities of the James Bay Lowland, drilling several drill holes to basement (e.g., Martison, 1953). The GSC completed regional mapping of the Hudson Bay Platform during the 1970’s (e.g., Sandford & Norris, 1975). Although Bostock’s (1968) work was of regional scope, he and colleagues reported much outcrop along drainages from the Muketei westwards.

Diamond explorers, Monopros (a subsidiary of De-Beers) and Selco, traced diamond indicator minerals from initial discoveries in the Kirkland Lake area into the Lowland in 1962 culminating in the discovery of the Jurassic-aged, Attawapiskat kimberlites in 1989. In 1971 Inco, Sherritt Gordon, Denison and Kennco drilled base metal targets to the north and west of the current area. During the mid-1990’s the then Spider-KWG joint venture tested potential kimberlite targets over a 200 km square area centred on McFaulds Lake, quickly discovering the five, Proterozoic age Kyle diamondiferous kimberlites under Paleozoic cover. Elevated chromite counts were reported in drainage and overburden samples collected during this period marking the earliest report of chromite in the area (Gleason and Thomas, 1997).

The 2002 discovery of chalcopyrite by DeBeers and recognition of VMS mineralization in 2003 by Spider and KWG focused exploration attention in the McFaulds area prompting Richard Nemis and Freewest to cause the claims comprising the current property to be staked. Howard Lahti, PhD, P. Geo., was first to recognize chromite in situ noting two thin beds in drill hole FW-06-03. The Eagle One Ni-Cu-PGE discovery in 2007 precipitated intense exploration effort over the following two years during which time the Blackbird, Big Daddy, Black Thor, Black Label and Black Creek chromite and the Thunderbird vanadium deposits were discovered, Initial resource estimates have been made on all but the last three mentioned deposits (see Section 15 on Adjacent Properties).

6.2 PROPERTY HISTORY

Spider has managed exploration since inception, latterly through Billiken Management Services, Inc. In mid-2007 Billiken was sold to an unrelated party, thus Spider and Billiken have operated at arms-length for almost three years.

Early exploration programs (airborne surveys and ground follow-up) were conducted over contiguous properties. Costs were apportioned according to the work done over each property. For this reason the J (Big Daddy) grid extends over the adjacent properties.

At some time prior to 2007 Probe Mines held an option on the Freewest Claims, completing three short diamond drill holes (F-1 to F-3) that narrowly missed the chromite mineralization. The claims were returned to Freewest before Probe was vested.

The past exploration history, which was reported in the previous 43-101 report, has been summarized in Table 6.1.

6.3 HISTORIC PRODUCTION

The property has no historical resource or reserve estimates and there has been no prior production.

Table 6.1

Summary of Exploration Completed on SKF Property between 1995 and 2008

Note: SPQ = Spider

7.0 GEOLOGICAL SETTING

7.1 REGIONAL GEOLOGY

The edge of the Hudson Bay Platform also marks the maximum transgression (180 m above sea level) of the ancient Tyrrell Sea and of deposition of several metres of thixotrophic, fossil-bearing mud.

The property lies at the western edge of the preserved flat-lying, Lower Paleozoic Hudson Bay Platform, remnants of which were observed on the current property. The Hudson Bay Platform comprises Ordovician to Cretaceous sedimentary strata which reach a maximum known thickness of about 2,500 m in Hudson Bay. Two holes contain saprolite, indicative of an early Paleozoic tropical weathering event (Patrick Chance, personal communication, 2010).

The property lies in the Sachigo greenstone belt of the Oxford–Stull Domain (Stott and Rainsford, 2006) of the Sachigo Subprovince (Figure 7.1). The Sachigo greenstone belt is arcuate, west-facing and 100 km long by 5 km to 25 km wide belt. It is in intrusive contact with granodiorite rocks to the north and west (Atkinson et al., 2009). The Oxford-Stull Domain also contains a series of significant mafic to ultramafic intrusions including Big Trout, Springer, Highbank and McFaulds. Those at Big Trout and Highbank exhibit magmatic layering a characteristic of fertile mafic complexes.

Figure 7.1

Regional Geological Setting of the Superior Province

7.2 LOCAL GEOLOGY

Due to poor access, lack of abundant outcrop and limited mapping, local geology has been largely interpreted from airborne geophysical data and constrained by limited and selective

diamond drilling (Figure 7.2). The area is underlain by volcanics of the Sachigo belt into which the Ring of Fire mafic-ultramafic complex is intruded. The Ring of Fire complex comprises three elements; the feeder dyke within which the Eagle One Ni-Cu-PGE deposit is contained, the sill or sills containing stratiform chromite deposits, here called the McFaulds Lake Sill, and the ferrograbbo bodies that contain the Thunderbird Fe-Ti-V prospect.

Petrographic and chemical evidence from the Big Daddy property (Scoates, 2009-03) indicate that the McFaulds Lake Sill is a well fractionated, body comprising lower (to the northwest) olivine-rich units overlain by upper olivine-poor units. The principal Big Daddy chromite bodies lie at the top of the olivine-rich unit.

The McFaulds Lake mafic-ultra-mafic sill (elsewhere termed the Ring of Fire intrusion) has been intermittently emplaced along a granodiorite-greenstone contact over a 20 km length of which 15 km between Eagle 2/Blackbird 1 (in the southwest) and Black Thor/Black Label (in the northeast) are known to be mineralized. The Thunderbird vanadium deposit occurs in ferrograbbos which form a distinct magnetic anomaly that lies parallel to and east of the main McFaulds Sill about 9 km northeast of the Big Daddy deposit.

Figure 7.2

Local Geology of the McFaulds Lake Sill showing the Big Daddy Chromite Occurrence.

(Symbols: Red - Ni-Cu-PGE, Purple lines - Cr2O3, Blue – Fe-Ti-V & Pink – VMS). Modified from OGS MRD 265

Volcanic rocks in the McFaulds Lake area have a U/Pb zircon isotopic age of 2737 ±7 Ma which is comparable with ages from other parts of the Superior Province of the Canadian Shield (Stott, 2007). It is older than most parts of the Abitibi belt, but similar in age to greenstone belts in Wabigoon and other belts.

7.3 PROPERTY GEOLOGY

The interpreted geology of the property is based on drill holes and ground geophysics (Figure 7.3). Bedrock is obscured by a relatively thin (approximately 10 m) layer of marine clay with the exception of two small areas of peridotite outcrop that straddle the creek near the north property boundary.

Figure 7.3

Bedrock Geology of the Big Daddy Deposit Based on Drill Hole and Ground Geophysics. (UTM Zone

16;NAD’83)

Glacial overburden over the deposit area is typically 6 m to 10 m thick but can be as little as 1.6 m (drill hole FW-09-30). It comprises marine clay with a few pebbles and cobbles at the bedrock surface. Locally, overburden may be as much as 13.4 m thick (drill hole FW-08- 05).

Saprolite was reported in two holes (FW-04-01 and FW-09-45) drilled on EM targets off the sill. Oxidation (assumed to be due to deep, early Paleozoic weathering) is commonly observed to 50 m below surface but hematite has been reported as deep as 250 m.

Drilling and geophysical data suggest that the sill segment containing the Big Daddy deposit is about 1,000 m thick. Limited information suggests that the sill thins to the southwest. Mappable geologic contacts and limited igneosedimentary structures (e.g., bedding) indicate that the sill has been rotated from an original horizontal to a nearly vertical to overturned position.

Silicate minerals within the sill have been pervasively altered to serpentinite (serpentine- talc-chlorite), however, original textures are well preserved in both hand specimen and thin section.

Sill stratigraphy, comprising lower (to the northwest) olivine-rich and upper (to the southeast) olivine-poor units, indicates that the sill is strongly fractionated and that the top is to the east (Scoates, 2009-03). The olivine-rich units comprise a lower marginal pyroxenite, dunite, peridotite and chromitite. Overlying olivine-poor units are relatively Cr-poor comprising pyroxenite and gabbros which were observed in intrusive contact with overlying volcanics.

The dunite is typically coarse grained and dull green. While the grain size varies there is little evidence of disruption. Magnetite occurs as rims around former olivine grains, as diffuse patches and in narrow (~1 cm wide), massive veinlets. The latter are strongly conductive. The abundance of magnetite and presence of narrow but highly conductive magnetite veinlets produce large amplitude total magnetic fields and diffuse but persistent AEM anomalies that extend from the Big Daddy claim, northwards onto the Black Creek (Probe-Noront) and Black Thor-Black Label properties.

The peridotite is chaotic in appearance, being marked by abrupt grain size changes. Scoates (2009-03) describes an extensive, magmatic breccia unit that reflects a high energy magmatic environment possibly occupying a feeder dyke. Massive chromite fragments were observed in earlier (pre-2009) holes (ibid.) but were rare in subsequent holes.

The peridotite unit also contains the economically significant chromite mineralization of which two intervals were typically observed. The stratigraphically lower unit(s) are characterized by variable (from interval to interval) chromite contents between 15% and 40% Cr2O3. The upper massive unit comprises uniform, ~40% Cr2O3, grades, often within 1% over tens of metres. The grade of the upper unit is consistent over the deposit with the exception of the southwest part where grades drop to ~38% Cr2O3.

Drilling of the Big Daddy deposit has been carried out from footwall to hanging wall so that the peridotite has been well sampled. The unit is marked by frequent faulting and fracturing reflected in poor recoveries, lower RQD’s and evidence of deep weathering. While the faulting and fracturing may be important in mine design through-going faulting is not required to resolve continuity between holes or sections. It is suggested that these faults reflect mechanical discontinuities between relatively unaltered massive chromite and pervasively altered, soft, host rocks (Patrick Chance, personal communication, 2010).

The upper contact of the massive chromitite with olivine-poor pyroxenite is sharp, occurring over as little as a centimetre. The pyroxenite comprises a distinctive pale green unit in which pseudomorphs after pyroxene are distinctive. In addition the Cr2O3 contents drops from ~40% to less than 1% across this contact.

Gabbros, some in contact with overlying volcanics, were reported in several holes.

Volcanic hanging wall rocks were not encountered during the recent drill campaign. Work on the McFaulds Lake volcanogenic massive sulphides suggests that they reflect a back arc environment (Jim Franklin, personal communication, 2010).

The Big Daddy appears to be contained between north-trending, left lateral faults near section 1000 E and 2100 E where geophysical anomalies appear to be truncated and along which the Black Creek deposit is shifted.

8.0 DEPOSIT TYPES

Primary/orthomagmatic chromite occurs in two types of deposits, stratiform and podiform. These both have comparable mineralogy but contrasting origins. Residual and transported deposits are additional but rarely significant producers (WIM, 2008). The Big Daddy chromite is a typical stratiform deposit by virtue of its setting, host rock lithologies, mineralogy and dimensions.

The current major producers are all stratiform and occur in sills typically emplaced in stable continent environments. Productive sills include the Bushveld (South Africa), Great Dyke (Zimbabwe), Sukinda (Orissa, India), Kemi (Finland) and Ipuera (Brazil).

The collectively important but individually minor podiform deposits occur as very small pods (median tonnage 20,000 t; Singer et al., 1986) in the tectonized base of obducted ophiolites. These deposits are preserved in younger mountain ranges including the Tethyan orogen from the Balkans, through Turkey to Pakistan and India. Similar deposits occur in the North American Cordillera in northern California and Oregon. In exceptional environments, larger, multimillion tonne, podiform deposits have developed (e.g., Kempirasai, Kazakhstan).

Residual secondary deposits are locally significant producers (e.g., Sukinda). Locally accumulations in beach sands may be significant (e.g., Oregon), however, these tend to have low Cr:Fe ratios making them problematic to market.

Stratiform deposits account for 45% of total world chromite production and 95% of reserves. The Bushveld alone accounts for 35% of production. Other significant producers are the Great Dyke, Kemi and Brazilian deposits, which together produce about 10% of the world’s total. The many small scale podiform deposits produce the remaining 55% of chromite which enters the market as ores rather than ferrochrome.

8.1 RELATED DEPOSITS

The shear size, emplacement and crystallization processes associated with ultramafic sills give rise to an important group of four related deposit types, of which three have been found in the McFaulds Sill; magmatic massive sulphides (MMS: Ni-Cu-PGE’s), stratiform chromite, Fe-Ti-V, and reef-type, low sulphide, PGE deposits (not yet found in the McFaulds Lake area).

MMS deposits (e.g., Eagle One, Voiseys Bay) represent the accumulation of sulphides in traps in the floors of feeder dykes below the main sill. The remaining deposits occur within the cooling sills under a set of crystallization conditions that favour the economically important minerals.

Additional details are available at several on-line sources including USGS (Cox and Singer, 1998), GSC (e.g. Eckstrand and Hulbert, 2008) and BC Department of Mines (Lefebure et al., 1995).

8.2 GENETIC MODEL FOR STRATIFORM CHROMITE

Stratiform chromite deposits are formed by magmatic segregation during fractional crystallization (fractionation) of mafic-ultramafic magma. Stratiform chromite deposits require that chromite be the major and ideally the sole crystallizing phase over an extended period. Irvine (1975, 1977) suggested two mechanisms whereby a chromite saturated picritic tholeiite liquid becomes more siliceous either by contamination (assimilation) with granitic and/or volcanosedimentary material or alternatively by mixing with a more siliceous differentiate of the parent magma, thereby causing chromite to precipitate in the absence of silicate minerals.

On the evidence of field relations and mineralogical data (Jackson 1961, von Gruenewaldt 1979) combined with isotopic studies (Kruger and Marsh 1982, Sharpe 1985, Lambert et al. 1989) it has been shown that large layered intrusions are not the result of single, one-event injections of magma, but are the result of repetitive inputs. Irvine (1977) demonstrated that if a new input of magma was injected into one that had reached a higher level of fractionation, the resultant mixing action could inhibit the fractional crystallization of silicate minerals such as olivine and orthopyroxene and permit the crystallization of chromite alone. This is the mechanism by which layers of massive chromitite can develop, without dilution by cumulate silicates. As illustrated in Figure 8.1 (after Irvine 1977), the mixing of liquid A which is on the olivine – chromite cotectic, with liquid D on the orthopyroxene field may, provided that points on the mixing line lie above the liquidus surface, culminate in a hybrid magma such as AD which will intersect the liquidus in the chromite field on cooling. Hence it will crystallize chromite alone while it moves to point X on the olivine – chromite cotectic, and thereafter it will continue to crystallize chromite and olivine. It has been shown that the decrease in the solubility of chromite in basaltic magma in equilibrium with chromite per degree centigrade fall in temperature is greater at high (1,300°C – 1,400°C) than at low (1,100°C – 1,200°C) temperature. Due to this concave – upward curvature of the solubility curve, the mixing of two magmas at different temperatures saturated (or nearly saturated) in chromite places the resultant mixture above the saturation curve, which suggests that point AD in Figure 8.1 is likely to lie above the liquidus.

The suggestions by Irvine (1977) are consistent with observations on chromitites in layered intrusions. Most significant amongst these observations is the fact that most of these chromitite layers occur at the base of well defined cyclic units (e.g. Bushveld Complex and Great Dyke in Southern Africa) or at/near the base of similar cyclic units. Further evidence comes from the textures of the underlying rock units which indicate a common cotectic crystallization of chromite with olivine or orthopyroxene showing that the magmas previously in the chambers were saturated with respect to chromite.

More recently, the crustal contamination hypothesis has been supported by MELTS (Ghiorso and Sack, 1995; Asimow and Ghiorso, 1998) thermodynamic modelling software and textural observations of xenolithic clasts of iron-formation occurring stratigraphically below the massive chromitite layers within the RFI. Workers investigating similar deposits such as

the Ipueira-Merado Sill determined, supported by isotopic and textural observations, that crustal assimilation by a primitive and chrome enriched magma was the most likely cause for the formation of the chrome deposit (Marques et al., 2003).

Figure 8.1

Phase Relations in the System Olivine-Silica-Chromite as determined by Irvine (1977)

(Illustrating the consequence of mixing primitive magma (A) with well fractionated (D) and slightly

fractionated (B) variants of the same primitive magma (Source: Naldrett et al., 1990))

Scoates (2009) speculates that both mixing of primitive magma with fractionated magma (Irvine, 1977) and crustal contamination of the parental magma (Irvine, 1975; Alapieti et al., 1989; Rollinson, 1997; Prendergast, 2008) appear to have had complementary roles in the formation of the Big Daddy chrome deposit. The hanging wall volcanics include both banded iron formation intervals and volcanogenic sulphide accumulations which, if assimilated by the sill, could alter magma chemistry sufficiently to deposit chromite.

Association of Ni-Cu-PGE with Stratiform Chromite

Stratiform chrome deposits are commonly associated with magmatic Ni-Cu-PGE mineralization. For sulphide precipitation to occur, the silicate liquid in the magma chamber must become sulphur-over saturated and this is dependent upon the following factors:

	·	Melt temperature.
	·	Oxygen fugacity.
	·	Magma composition – MgO/FeO ratio, SiO2 content, and S content.
	·	Magma recharge

As far as magma mixing is concerned, it is generally accepted (Campbell and Turner, 1986) that layered intrusions have formed through repetitive inputs of magma. These inputs are likely to have been turbulent and thus to have involved significant entrainment and mixing of resident magma within the input. The resulting hybrid would also spread out at the appropriate density level to give rise to turbulently convecting layers. If sulphides formed in the hybrid at this stage, the turbulent mixing and convection would have provided the ideal

environment in which they could have developed a high R-factor, and thus have become enriched in PGE. The R factor is defined as the ratio of silicate melt to sulphide melt during sulphide segregation.

Sulphide saturation may be achieved in one of three ways as proposed by Naldrett et al. (1990):

	·	Fractional segregation where sulphide saturation is attained through fractionation (Figure 8.2).

	·	Batch segregation where batch segregation of sulphide is achieved through mixing of a primitive magma with an evolved resident magma that is close to crystallizing plagioclase (Figure 8.2).

	·	Constitutional zone refining where sulphide saturation is preceded by volatileinduced partial melting and remobilization of cumulates and sulphides (Figure 8.3, example iv).

The above three processes lead to the formation of different types of deposits as illustrated in Figure 8.3. Subsolidus and deuteric processes are responsible for the modification of the original primary textures in these deposits.

It is important to note that the mixing of fresh primitive magma with that resident in an intrusion can give rise to a chromitite formation regardless of the degree of fractionation of the resident magma, whereas extensive segregation of sulphide will only occur as a consequence of this type of mixing close to or after the stage at which plagioclase saturation has been achieved by the resident magma.

Figure 8.2

Variation in Solubility of Fe-sulphide in Differentiating Basaltic Magma

(Modified after Naldrett & Von Gruenewaldt, 1989. (Source: Maier et al., 1998))

Figure 8.3

Cross-section through a Hypothetical Layered Intrusion

Diagram shows the types of chromitite and PGE-enriched sulphide deposits that can result from fractional crystallization, magma mixing and constitutional zone refining. Mixing of resident magma with primitive magma before plagioclase has appeared on the liquidus of the former is likely to produce sulphide- and, therefore, PGE- poor chromitite (Example I); fractional crystallization may give rise to a PGE-rich layer not associated with the base of a cyclic unit (Example II); mixing of resident magma with more primitive magma after plagioclase is crystallizing from the former may give rise to sulphide- and, therefore, PGE- enriched chromitites or PGE-rich sulphide layers (Example III). Volatile-induced partial melting of cumulates can give rise to constitutional zone refining and the concentration of PGE at the point at which the partial melt becomes saturated in sulphide (Example IV). (Re-drawn after Naldrett et al., 1990).

9.0 MINERALIZATION

9.1 OVERVIEW

The accumulation of chromite on the Big Daddy property depended on two processes. First, emplacement of the McFaulds Sill along a then near-horizontal contact between underlying granodiorite and overlying volcanic and sedimentary strata; and second, maintenance of the magma temperature and magma composition such that only chromite could crystallize over a prolonged period.

9.2 LOCALIZATION

The chromite mineralization of the Big Daddy deposit and similar discoveries such as the Black Thor and Black Label in the northeast and the Blackbird in the southwest (Figure 7.2) is hosted in the ultramafic unit (i.e. peridotite) of the McFaulds Lake Sill. Mineralization in the Big Daddy segment of the McFaulds Lake Sill occurs within a 65 to 180 metre thick, often brecciated peridotite interval lying stratigraphically above a dunitic footwall and below a pyroxenite hanging wall. The lower contact of mineralization tends to be gradational while the upper is sharp.

Mineralized rock comprises sub-millimetre-diameter, idiomorphic, cumulate, chromite grains. Mineralized intervals are a mixture of chromite and olivine crystals set in a fine grained peridotitic matrix. At lower Cr2O3 contents chromite grains are disseminated through the host rock. As concentration increases, bedding becomes evident but disappears at the highest grades (>35% Cr2O3) due to uniform crystal size and absence of silicate diluents.

The bulk of the Big Daddy chromite mineralization is manifested as a persistent tabular zone of massive chromite with distinct hanging and footwall contacts and with grades typically >35% Cr2O3.

9.3 DISTRIBUTION OF CHROMITE GRADES

Based on information derived from drill hole logs and assay data sheets, the Cr2O3 grades are distributed as shown in Table 9.1. In a generalized section, three broad grade-texture zones are evident. The onset of mineralization is marked by intermittent accumulations of heavily disseminated material with occasional massive beds. Stratigraphically above this zone, grades tend to be lower until the massive unit is reached. Grades in the massive unit are consistent and universally high (>40% Cr2O3) but fall slightly (36 to 38% Cr2O3) in the southern end of the deposit where pyroxene oikocrysts are indicative of lower grades.

Table 9.1

Distribution of Cr2O3 Grades

Mineralization Type	%Cr2O3	Remarks
Massive	30 – 50	Dominant type
Banded	20 – 30	Rare type. Individual bands may contain up to 40% Cr2O3
Semi-massive	20 – 30	Very minor type
Heavily disseminated	10 – 20	Locally common
Disseminated	1 – 10	Locally common [Background values]

9.4 SULPHIDES AND PGE

Massive sulphides have not been encountered in the chromite-rich zones. However, local sulphide disseminations have been noted within and immediately above the massive chromite layers. The identifiable sulphides are pyrrhotite, chalcopyrite, pyrite and rarely pentlandite.

A small (<10 cm diameter) sulphide-rich accumulation from hole FW-09-33 reported a massive, secondary Fe-Cu-Ni-sulphide assemblage (godevskite, Ni9S8 and mackinawite, (Fe,Ni)9S8 with minor chalcopyrite, chromite and trace millerite (Kjarsgaard, 2009), in a fault or shear zone. This assemblage is typical of low-temperature, hydrothermally emplaced nickel-iron sulphides.

10.0 EXPLORATION

The pre-2009 exploration is summarized under History (Section 6, Table 6.1) and was also described in detail in Micon’s (2009) previous report. The following outlines results of the most recent exploration campaigns which follow Micon’s (2009) recommendations.

10.1 2009-2010 EXPLORATION

Recent exploration programs reflect implementation of Micon’s 2009 recommendations.

10.1.1 QA/QC

In early 2009, Spider/KWG retained Tracy Armstrong to review the assay data set, make recommendations for replicate analyses, review the analytical methods used and recommend appropriate standards and control sample methodologies to ensure quality and to recommend protocols to meet Spider/KWG’s objective of rapidly acquiring the high quality data required to fully value the deposit.

Ms. Armstrong concurred with the adoption of XRF as the project’s standard method for chrome analyses. She identified several problematic batches which were re-analyzed, and she designed comprehensive QA/QC protocols and supervised the preparation and certification of standard materials (BD-1, DB-2 and BD-3) prepared from coarse rejects from previously submitted samples.

10.1.2 Evaluation of PGE – Potential of Hanging Wall Pyroxenite

During the late summer of 2009, Howard Lahti completed a comprehensive resampling program focusing on PGE’s in the hanging wall pyroxenite, taking almost 500 samples. These data show locally anomalous intervals containing up to 2 g/t Pt + Pd, however, there was no evidence of consistently mineralized interval that might reflect potential for a Merensky or Stillwater-style reef. Both these and subsequent data show a marked increase in PGE contents in the upper couple of sample intervals in the massive chromite.

10.1.3 Ground Geophysical Surveys

During 2009 and 2010, gravity, magnetic and pulse EM surveys were completed over the central portion of Grid J. In addition, a Max-Min survey was completed over a small oblique grid cut over the T-11 airborne target in the southwest corner of the property. A grid was also cut over the T-2 target and a hole (FW-09-45) was spotted using existing data.

In early 2009 the J grid was re-chained. Geosig (2009) then completed precise (+/- 0.1 m) Real Time Kinematic GPS levelling, gravity and gradiometer surveys. The gravity data, which were refined by modelling (e.g, Reed, 2009), show a distinct positive anomaly gaining width and magnitude from line 900 E to 1400 E and then continuing to about 2100 E where it

is abruptly truncated. Total magnetic intensity data show broad areas lying adjacent to and immediately north of the gravity anomaly.

In late October, 2009, Crone completed pulse EM surveys based on seven loops centred on the gravity anomaly and extending to the north property boundary. Extension of the survey over the southwest corner of the property and across the creek near 2100 E was not possible due to late freeze-up. The survey detected a diffuse but persistent anomaly adjacent to and northwest of the gravity anomaly, coinciding with the total field magnetic anomaly above and earlier airborne anomalies that persist northwards across the Probe property and onto the Freewest property. Hole FW-09-46 was collared in massive chromite and drilled northwest into the sill footwall where it cut a wide interval of magnetite-bearing, serpentinized dunite containing occasional massive magnetite-filled veinlets which were found to be highly conductive.

In January, 2010 Max-Min was completed over the T-11 grid situated in the southwest corner of the property. The data collected were ambiguous. The most significant response was a broad and diffuse anomaly evident only in the higher frequencies suggesting an overburden source. No hole was completed in this area.

10.1.4 T-2 Target

The T-2 target lies on the north property boundary, extending onto the western excised claim unit. Airborne magnetic data suggested a strong, strike-parallel, magnetic feature that extends onto SKF property where it bifurcates and weakens.

A single hole, FW-09-45, tested the target, returning a broad (16 m) interval of pyritic, interflow cherts and volcaniclastics containing trace amounts of chalcopyrite in ampibolitic, fragmental volcanic strata.

10.2 DELINEATION STAGE - 2009/2010 DRILLING

Drilling was completed in two campaigns; late September to mid-November, 2009 and January to early February, 2010. A total of 32 holes were collared on the Big Daddy deposit two of which did not reach the deposit hanging wall. One, FW-09-44, was abandoned due to poor drilling conditions. The second, FW-10-52, was suspended at 195 m prior to intersecting mineralization due a blockade by First Nations.

Holes were spotted and aligned relative to grid pickets. Routine down hole directional surveys with Flexit and Deviflex suggested minimal deviation (<6 m/100 m). North-seeking gyro surveys, run on several casings, generated refined initial azimuths and reported drooping of casings due to low-strength overburden. All casings were subsequently surveyed using a Timble Pro-XRT with an Omni Real-Time Correction (RTC) signal activated, providing accuracies of better than +/-0.4 m.

Logging was enhanced with the adoption of a standard project legend, adoption of GeoTic© for data capture and use of a Niton hand-held XRF to aid discrimination of chromite grade. In addition magnetic susceptibility, specific gravity, recovery, RQD and additional geotechnical parameters were collected for all holes.

Initial holes (2009) designed to confirm continuity of the deposit were drilled in pairs on sections 100 m apart. Eventually, a third deep hole was added. Intermediate (50 m spacing) holes were added where additional hanging and footwall contacts were required. Many of the in-fill holes that Micon will recommend had been planned for the 2010 campaign but were not drilled due to delays and uncertain supplies due to the blockade initiated by the communities of Marten Falls and Webequie.

Eventually 32 drill holes were completed with between two and four holes per section, spaced 50 or 100 m apart. Section lines are 100 m apart. The layout is depicted in Figures 11.1 and 17.2 and covered a total strike length of 1 km down to a maximum depth of about 365 m.

10.3 INTERPRETATION OF EXPLORATION INFORMATION

Although the geophysical techniques were initially aimed at identifying VMS and MMS targets, they were effective firstly in identifying the highly magnetic peridotitic phase of the McFaulds Lake Sill which contains the chromite mineralization, and secondly, in defining the potential chromite zone due to its high density characteristic. The strike lengths of the magnetic anomaly and gravity anomaly match the strike length of the chromite zone; furthermore, the intensity of the gravity anomaly is proportional to the thick massive chromite zone.

Drilling results indicate that the bulk of the Big Daddy deposit consists of massive chromite averaging 40% Cr2O3 with Cr/Fe ratio of approximately 2. The thickness of the deposit is variable but averages 17 m and 12 m for the southwest segment (BD 1) and northeast segment (BD 2), respectively. Both segments of the deposit remain open down dip and have yet to be closed off along strike.

The interpreted geology of the Big Daddy deposit is shown in Figure 7.3. A typical section of the deposit is shown in Figure 10.1.

Figure 10.1

Section 19+00 E (looking northeast) showing Pyroxenite cutting down into Massive Chromite Interval.

Coloured bars below drill hole traces show chromite-bearing intervals with values below. Section is

400 m long

11.0 DRILLING

The layout and extent of drill holes covering the Big Daddy deposit is shown in Figure 11.1. Details for each hole are given in Table 11.1.

11.1 2004, 2006 AND 2008 DRILLING CAMPAIGNS

The initial diamond drilling on the SKF claims was conducted in the winter of 2004. In that year, drill hole FW-04-01 was completed in claim block 3008793 (H Grid). Drill hole FW- 06-02 (H Grid) and discovery hole FW-06-03 and hole FW-06-04 in claim P 3012253 (J Grid) were drilled in 2006.

The test drilling operations were suspended during 2007 and then revived in the winter of 2008. Between January and December, 2008, nineteen NQ drill holes (6,098 m) were completed on three targets on the Big Daddy claim (J Grid). The drilling completed during this phase defined chromite mineralization over a strike length of 400 m.

11.2 2009/2010 DRILLING CAMPAIGN

A total of 32 holes directed at the Big Daddy deposit (J Grid) were drilled during the 2009/2010 drill campaign. This drilling tested the chromite mineralization to a vertical depth of about 365 m and increased the known strike length of the mineralization from 400 m to about 1,200 m.

11.3 DRILLING PROTOCOLS

11.3.1 Spotting and Surveying of Drill Collars

Collars were spotted relative to the 100 m cut lines. In early 2009, the J grid was re-cut and 25 metre-spaced pickets re-chained. Picket coordinates were located by GPS (Trimble GeoXH with post processing using an identical unit as a local base station (positional error is ±0.1 m)) and Trimble ProXRT with Omnistar real time correction (error is ±0.4 m). All coordinates are reported as metres in UTM Zone 16, NAD’83 datum. Elevations are reported as distance above sea level.

Cut lines and many pre-2009 drill pads are also visible on a Quickbird satellite image (circa summer 2008). All data points coincide within approximately 1 m.

Drill hole collars were spotted relative to the cut, J grid and azimuths were taken to be those of the cut lines. Initial collar dips were set using a builders’ inclinometer. Azimuths and dips are reported in degrees.

Upon completion of drilling, all collars were surveyed using a pole-mounted, Trimble ProXRT GPS receiver. Buried casings were located using a magnetic pin finder.

Figure 11.1

Plan Showing all Drill Holes Covering the Big Daddy Deposit

Note: The deposit is shown in purple colour

Table 11.1

List of Drill Holes Drilled on SKF Property (2004 – 2010 Programs) (UTM Zone 16, NAD’83)

DDH Id	UTM_E	UTM_N	Elevation	Length	Grid	Line	Station	Azimuth	Dip
FW-04-01	555535.0	5846609.0	170.0	190.5	H	37+00 mS	05+50 mE	130.0	-45
FW-06-02	555368.0	5845849.0.	170.0	197.0	H	30+00 mE	09+00 mS	130.0	-50
FW-06-03	551084.5	5845307.3	174.0	353.5	J	10+00 mE	15+28 mN	150.6	-50
FW-06-04	551592.9	5845230.2	170.8	254.0	J	14+00 mE	12+01 mN	329.1	-50
FW-08-05	551048.2	5845369.3	174.7	327.0	J	10+00 mE	16+01 mN	151.1	-50
FW-08-06	550960.2	5845321.7	173.8	384.0	J	09+06 mE	16+00 mN	155.9	-50
FW-08-07	551138.6	5845423.6	172.9	405.7	J	11+00 mE	16+00 mN	149.6	-50
FW-08-08	551685.8	5846058.5	171.3	270.0	J	19+01 mE	18+72 mN	150.7	-50
FW-08-09	551685.4	5846059.1	171.6	176.0	J	19+01 mE	18+73 mN	150.7	-65
FW-08-10	551590.7	5845233.9	170.9	312.0	J	14+00 mE	12+06 mN	149.9	-50
FW-08-11	551554.3	5845294.9	170.7	309.0	J	14+00 mE	12+76 mN	149.2	-50
FW-08-12	551112.6	5845468.1	173.1	354.0	J	11+00 mE	16+51 mN	149.9	-50
FW-08-13	551163.3	5845380.4	172.8	297.0	J	10+99 mE	15+50 mN	150.5	-50
FW-08-14	551181.9	5845448.6	173.6	189.0	J	11+50 mE	16+00 mN	150.3	-50
FW-08-15	551154.8	5845495.5	172.1	240.0	J	11+50 mE	16+50 mN	147.7	-50
FW-08-16	550875.0	5846305.0	174.0	372.0	J	13+19 mE	24+97 mN	315.0	-50
FW-08-17	550875.0	5846305.0	174.0	376.0	J	13+19 mE	24+97 mN	315.0	-65

DDH Id	UTM_E	UTM_N	Elevation	Length	Grid	Line	Station	Azimuth	Dip
FW-08-18	551190.7	5845511.9	171.4	255.0	J	11+93 mE	16+50 mN	155.0	-50
FW-08-19	551167.7	5845558.9	171.8	273.0	J	11+97 mE	17+02 mN	145.4	-50
FW-08-20	551134.0	5845599.0	174.0	375.0	J	11+88 mE	17+55 mN	150.0	-50
FW-08-21	551119.3	5845646.5	172.3	447.0	J	12+00 mE	18+04 mN	150.6	-50
FW-08-22	551208.6	5845694.5	172.2	330.0	J	13+00 mE	18+02 mN	149.8	-50
FW-08-23	551183.6	5845735.8	172.4	424.0	J	12+99 mE	18+50 mN	145.8	-50
FW-09-24	551340.5	5845658.8	171.6	219.0	J	14+00 mE	17+00 mN	150.1	-50
FW-09-25	551290.9	5845743.4	172.0	339.0	J	14+00 mE	18+09 mN	148.6	-50
FW-09-26	551505.6	5845756.7	171.4	207.0	J	16+00 mE	16+98 mN	150.7	-50
FW-09-27	551455.7	5845840.7	171.5	321.0	J	16+00 mE	18+00 mN	149.7	-50
FW-09-28	551657.6	5845895.6	171.0	207.0	J	18+00 mE	17+45 mN	150.7	-50
FW-09-29	551603.9	5845986.4	171.3	368.0	J	18+00 mE	18+49 mN	149.4	-50
FW-09-30	551838.4	5846005.7	170.4	65.0	J	20+00 mE	17+51 mN	150.2	-50
FW-09-31	551788.6	5846092.2	171.1	339.0	J	20+01 mE	18+52 mN	148.4	-50
FW-09-32	551859.5	5846135.2	169.8	291.5	J	21+00 mE	18+50 mN	150.1	-50
FW-09-33	551381.9	5845791.6	172.7	267.0	J	15+00 mE	17+95 mN	149.6	-50
FW-09-34	551239.8	5845831.8	171.8	468.0	J	14+00 mE	19+02 mN	150.3	-50
FW-09-35	551405.3	5845925.7	171.7	429.0	J	16+00 mE	18+98 mN	150.2	-50
FW-09-36	551429.4	5845710.4	172.6	192.0	J	15+00 mE	17+01 mN	150.2	-50
FW-09-37	551259.4	5845608.0	172.2	175.0	J	13+00 mE	17+01 mN	150.4	-50
FW-09-38	551805.9	5846225.5	171.2	423.0	J	20+99 mE	19+55 mN	150.7	-50
FW-09-39	551517.7	5845936.5	171.9	328.0	J	17+01 mE	18+50 mN	149.5	-50
FW-09-40	551569.6	5845849.9	171.2	175.5	J	17+00 mE	17+49 mN	150.0	-50
FW-09-41	551469.6	5846018.6	171.8	490.5	J	17+01 mE	19+46 mN	150.9	-50
FW-09-42	551745.9	5845954.4	171.0	133.5	J	19+00 mE	17+51 mN	150.5	-50
FW-09-43	551696.0	5846040.5	171.1	330.0	J	19+01 mE	18+51 mN	150.7	-50
FW-09-44	551553.8	5846071.9	171.4	423.0	J	18+00 mE	19+49 mN	149.7	-50
FW-09-45	552792.0	5846549.0	174.0	228.0	J	31+00 mE	17+32 mN	135.0	-50
FW-09-46	551771.9	5845909.5	171.1	351.0	J	19+00 mE	16+99 mN	329.1	-50
FW-10-47	551542.3	5845896.2	171.2	177.0	J	17+01 mE	17+98 mN	149.1	-50
FW-10-48	551629.1	5845944.3	171.4	228.0	J	19+00 mE	18+02 mN	150.2	-50
FW-10-49	551329.4	5845881.5	172.1	456.0	J	15+00 mE	18+99 mN	150.2	-50
FW-10-50	551721.2	5845997.0	171.2	265.0	J	19+00 mE	18+00 mN	150.6	-50
FW-10-51	551813.5	5846048.9	170.3	156.0	J	20+00 mE	18+02 mN	148.8	-50
FW-10-52	551645.8	5846126.2	171.1	195.0	J	19+00 mE	19+50 mN	150.8	-50
FW-10-53	551884.7	5846091.9	169.5	182.0	J	20+99 mE	18+01 mN	149.3	-50
FW-10-54	551404.3	5845753.3	172.4	210.0	J	15+00 mE	17+51 mN	150.4	-50
FW-10-55	551188.2	5845338.3	173.7	95.0	J	11+00 mE	15+00 mN	153.1	-50
FW-10-56	551151.9	5845540.2	173.3	241.0	J	11+70 mE	16+94 mN	140.7	-50

11.3.2 In-hole Directional Surveys

In-hole deviations were determined using one of three instruments; Flexit, Deviflex and north-seeking gyro. The Flexit employs a pendulum for inclinations and a magnetic compass to measure azimuth. Magnetic azimuth data are not usable due to the prevalence of magnetite in the sill. The Deviflex employs a pendulum for inclination and deformation of a flexible tube to estimate deflection. The instrument is deployed inside the drill string and is run through the entire hole to correctly estimate deviation. A north-seeking gyro was used to determine the down-hole deviation parameters of 12 holes. Once set, the gyro provides both

the dip and azimuth for each station down the hole. Plans to complete both Deviflex and north-seeking gyro readings on a number of holes to assess the quality of the methods were not possible due to scheduling and equipment issues.

A review of results suggests that maximum deviations are less than 6 m per 100 m in both azimuth and dip.

11.4 SUMMARY AND INTERPRETATION OF THE RESULTS OF THE

DRILLING COMPLETED ON THE BIG DADDY DEPOSIT

Forty-two drill holes intersected chromite mineralization. All but three intersections (FW- 06-03, FW-09-46 and FW10-56) were in holes collared at a 150° azimuth and -50° dip, thus footwall and hanging wall pierce points are evenly distributed providing good control on the mineralized envelopes.

Core recoveries were excellent particularly for the mineralized intercepts. Table 11.2 provides the composite assay results obtained from drill intersections >25% Cr2O3 on the Big Daddy deposit. An interpretation of the geometry of the deposit in plan view is given in Figure 11.1

The deposit consists of two segments, BD 1and BD 2 (Figure 17.2) and each segment comprises principal and subsidiary massive chromite bodies. The major massive chromite trends between 050 degrees and 060 degrees following the trend of the gravity anomaly. Based on the current drilling, the main mass of the Big Daddy deposit covers a strike length of 1 km and averages 17 m and 12 m in true thickness for BD 1 and BD 2, respectively. The mineralization has been tested to a vertical depth of about 365 m and remains open down dip and along strike.

Table 11.2

Big Daddy : Drill Intercept Summary (>25% Cr2O3)

Hole #	Section	Station	Azimuth	Dip	Length	Intercepts
						From (m)	To (m)	Length (m)	Pd ppb	Pt ppb	Cr2O3 %	Fe %	Fe2O3 %	Cr:Fe
FW-08-05	10+00 E	1600 N	150o	50o SE	327	251.20	264.00	12.80	101	86	25.18		16.68	1.48
						264.00	270.00	6.00	49	41	34.03		18.69	1.78
						291.40	298.85	7.45	31	90	37.00		22.68	1.60

FW-08-07	11+00 E	1600 N	150o	50o SE	405.7	194.35	205.90	11.55	440	321	28.63	14.74		1.33
						209.80	223.20	13.40	88	186	33.92	18.67		1.24

FW-08-12	11+00 E	1650 N	150o	50o SE	354	228.25	240.00	11.75	407	177	34.36		21.99	1.53
						252.25	260.70	8.45	272	199	33.23		25.55	1.27

FW-08-13	11+00 E	1550 N	150o	50o SE	297	74.30	102.00	27.70	138	186	33.06		17.29	1.87
						116.35	142.15	25.80	283	205	34.76		24.34	1.40

FW-08-14	11+50 E	1600 N	150o	50o SE	189	36.25	81.00	44.75	166	189	39.30		20.27	1.90
						81.00	103.50	22.50	201	154	26.64		18.54	1.41

FW-08-15	11+50 E	1650 N	150o	50o SE	240	160.15	171.30	11.15	171	146	34.41		24.14	1.39

FW-08-18	12+00 E	1650 N	150o	50o SE	255	44.90	46.50	1.60	291	177	31.77		25.08	1.24
						104.70	136.60	31.90	67	88	37.60	15.61		1.65

FW-08-19	12+00 E	1700 N	150o	50o SE	273	141.50	144.10	2.60	222	199	31.32	13.79		1.55
						160.85	161.95	1.10	54	59	32.16	20.00		1.10
						183.00	229.50	46.50	189	212	37.18	15.30		1.66

FW-08-20	12+00 E	1750 N	150o	50o SE	357	260.10	263.70	3.60	173	153	31.60	14.30		1.51
						304.30	336.95	32.65	168	218	39.56	14.37		1.88

FW-08-21	12+00 E	1800 N	150o	50o SE	447	376.00	385.80	9.80	67	122	37.33		23.23	1.57
						405.00	417.00	12.00	105	144	35.46		21.99	1.58

FW-08-22	13+00 E	1800 N	150o	50o SE	330	256.05	262.65	7.60	247	260	28.55	10.34		1.89
						263.65	298.50	34.85	170	194	42.08	15.92		1.81

FW-08-23	13+00 E	1850 N	150o	50o SE	424	332.30	337.50	5.20	526	297	37.36	15.04		1.70
						337.30	351.50	14.00	133	157	24.54	11.41		1.47
						351.50	378.00	26.50	98	178	38.78	14.92		1.78

FW-09-24	14+00 E	1700 N	150o	50o SE	219	73.50	80.30	6.80	264	229	41.01		21.10	1.90
						100.87	132.20	31.33	167	230	40.63		23.40	1.70

FW-09-25	14+00 E	1800 N	150o	50o SE	339.5	232.1	270.35	38.25	167	231	41.63		21.04	1.94

						Intercepts

FW-09-27	16+00 E	1800 N	150o	50o SE	321	173.30	186.80	13.50	282	245	36.32	20.77	1.71
						208.00	246.80	38.80	204	216	42.99	20.99	2.00

FW-09-28	18+00 E	1750 N	150o	50o SE	207	38.70	61.10	22.40	117	200	41.30	22.16	1.82

FW-09-29	18+00 E	1850 N	150o	50o SE	368	117.00	136.00	19.00	496	231	40.02	19.92	1.97
						226.00	230.70	4.70	456	267	37.90	20.39	1.82
						234.75	244.30	9.55	319	386	38.33	19.70	1.90
						248.60	323.75	75.15	234	248	43.40	21.26	2.00

FW-09-30	20+00 E	1750 N	150o	50o SE	77	24.10	32.75	8.65	263	257	40.92	22.61	1.77

FW-09-31	20+00 E	1850 N	150o	50o SE	339	207.00	214.50	7.50	184	218	41.61	20.49	1.99
						220.50	225.00	4.50	253	390	36.46	19.36	1.84
						235.90	264.50	28.60	179	215	40.26	19.80	1.99

FW-09-32	21+00 E	1850 N	150o	50o SE	291.5	180.90	186.00	5.10	301	238	40.78	22.57	1.77
						188.00	196.15	8.15	270	280	38.50	21.45	1.76
						200.60	206.60	6.00	215	190	37.55	21.79	1.69

FW-09-33	15+00 E	1800 N	150o	50o SE	267	195.00	203.70	8.70	289	185	29.92	22.25	1.32
						203.70	205.60	1.90	198	194	34.89	25.86	1.32
						207.60	210.00	2.40	145	197	29.25	23.45	1.22
						210.00	221.00	11.00	115	195	40.29	25.63	1.54

FW-09-34	14+00 E	1900 N	150o	50o SE	468	343.50	363.00	19.50	235	228	33.17	18.38	1.76
						383.50	415.22	32.72	247	252	41.25	20.93	1.93

FW-09-35	16+00 E	1900 N	150o	50o SE	429	349.16	355.50	6.34	259	345	36.95	28.80	1.25
						364.50	399.00	34.50	318	270	41.15	21.25	1.89

FW-09-36	15+00 E	1800 N	150o	50o SE	192	9.80	21.00	11.20	122	179	40.14	21.12	1.86
						24.90	38.00	13.10	139	235	31.22	20.39	1.50
						47.65	96.00	48.35	162	231	41.35	22.03	1.84

FW-09-37	13+00 E	1700 N	150o	50o SE	171	100.00	114.40	14.40	168	200	41.07	22.35	1.80

FW-09-38	21+00 E	1950 N	150o	50o SE	423	263.00	266.00	3.00	622	269	34.10	22.92	1.46
						390.50	398.00	7.50	240	201	39.38	24.58	1.57

FW-09-39	17+00 E	1850 N	150o	50o SE	328	119.10	124.50	5.40	406	206	36.96	21.84	1.66
						124.50	138.00	13.50	237	89	33.44	21.30	1.54

FW-09-40	17+00 E	1750 N	150o	50o SE	175	79.50	83.60	4.10	240	291	34.62	22.76	1.49
						87.40	102.20	14.80	150	225	43.11	20.95	2.01

FW-09-41	17+00 E	1950 N	150o	50o SE	490.5	234.00	235.50	1.50	311	173	36.41	28.53	1.25

						Intercepts
						262.50	265.50	3.00	339	208	33.39	25.52	1.28
						319.50	320.60	1.10	782	257	31.38	23.23	1.32

FW-09-42	19+00 E	1750 N	150o	50o SE	133.5	25.50	31.50	6.00	115	210	36.01	20.32	1.73
						32.70	35.90	3.20	53	211	39.45	20.69	1.87

FW-09-43	19+00 E	1850 N	150o	50o SE	330	225.00	249.00	24.00	190	260	35.75	18.99	1.84
						260.00	317.00	57.00	216	241	40.52	20.73	1.91

FW-09-44	18+00 E	1950 N	150o	50o SE	423	281.35	314.00	32.65	508	252	36.33	19.11	1.86

FW-09-46	19+00 E	1700 N	330o	50o NW	350	43.00	51.10	8.10	117	211	34.28	20.39	1.64
						54.10	64.70	10.60	162	203	41.45	19.70	2.06
						109.50	112.00	2.50	525	220	32.21	19.77	1.59

FW-09-47	17+00 E	1800 N	150o	50o SE	177	66.00	76.20	10.20	297	135	34.06	22.34	1.49

FW-09-48	18+00E	1800 N	150o	50o SE	228	8.90	10.75	1.85	521	276	40.44	21.13	1.87
						13.65	28.50	14.85	299	149	39.52	21.41	1.81
						126.20	132.00	5.80	218	205	37.79	20.84	1.77
						136.93	144.10	7.17	186	330	36.29	20.61	1.72
						148.00	180.40	32.40	137	233	42.51	21.52	1.93

FW-10-49	19+00 E	1900 N	150o	50o SE	456	337.40	338.65	1.25	748	370	41.47	23.45	1.73
						346.30	403.30	57.00	237	259	40.52	20.58	1.93

FW-10-50	16+00 E	1800 N	150o	50o SE	256	79.50	100.00	20.50	241	243	38.00	19.19	1.94
						103.75	124.65	20.90	285	329	38.13	19.53	1.91
						135.00	198.30	63.30	211	237	41.93	20.97	1.96

FW-10-51	20+00 E	1800 N	150o	50o SE	156	111.55	116.00	4.45	169	226	40.41	20.82	1.90
						118.50	133.40	14.90	308	273	41.02	22.54	1.78

FW-10-53	21+00 E	1800 N	150o	50o SE	182	99.10	106.75	7.65	176	241	40.52	21.95	1.81

FW-10-54	19+00 E	1750 N	150o	50o SE	210	137.60	142.70	5.10	255	267	26.70	18.87	1.38
						155.00	181.80	26.80	124	212	41.46	22.31	1.82

FW-10-55	11+00 E	1500 N	150o	50o SE	95	10.70	44.00	33.30	239	209	37.18	21.21	1.72

FW-10-56	11+50 E	1750 N	150o	50o SE	240	146.67	147.62	0.95	84	191	37.60	24.60	1.50
						173.61	223.02	49.41	225	239	37.86	20.10	1.84

Notes. 1. Intercept lenghts do not equal true widths. 2. Intercepts are as averaged by J. Burns of Spider. 3. Cr:Fe ratios are averages for the intercept for the elements.

12.0 SAMPLING METHOD AND APPROACH

The core logger marked out lithologic units including mineralized intervals. A Niton handheld XRF was used to more precisely locate assay cut-off (<5% Cr2O3) and grade-range limits. Generally the entire mineralized interval plus a minimum of five intervals (~7.5 m) into sub-cut-off material were sampled. In a few places, wide (>20 m) sections containing <5% Cr2O3 were encountered within the broadly mineralized zone and were not sampled.

The geologist then marked out end points of sample intervals. All sample intervals were selected within geologically-defined intervals of uniform lithology (including alteration and structure) and then of consistent grade, finally selecting samples of ~1.5 m length. Lower grade “shoulders” on massive intervals and rare lower grade intervals within massive material were sampled separately to ensure that true grade-thickness profiles were captured. A few sample intervals were as short as 0.3 m.

In view of the wide intervals of consistently high grade material, geologists tended to synchronize sample start or finish positions with driller’s blocks providing for great uniformity in the sampling process and allowing for consistency between geotechnical and chemical parameters. Once the sample intervals were selected, sample tags were inserted and sample descriptions recorded.

A technician then completed geotechnical observations including core photography, magnetic susceptibility, specific gravity (SG), recovery and RQD, after which samples were cut and packed. The sample cutters maintained a sample log which provided a means of verifying values entered by the logger.

Core cutting was carried out using diamond-embedded blades in a separate tent. Cutters wore face masks, gloves and glasses while the saw mist was vented from the tent. Core cuttings were accumulated and backhauled to a licensed landfill.

Samples were cut by batch, so that each batch was checked, packed and sealed before the next was started.

Samples were placed in 20 L plastic pails, in rice bags, sorted by batch position. Each rice bag (one per pail) was sealed with a numbered locking tag (Figure 12.1). The lid was then secured with locking ties inserted through drilled holes to avoid separation in transit. Samples were shipped by batch (typically three pails).

Pails were transported to Nakina, stored in a secure warehouse and then shipped by bonded carrier to Actlabs in Thunder Bay. Upon receipt Actlabs issued work orders by which the batch was tracked to completion.

The sampling process and data capture, evolved over the 2009/2010 drilling program, such that an already low error rate was reduced to near zero. In addition the grade of each interval

as, visually estimated by the logger, may be validated against the specific gravity and checked on core photos.

Micon comments

Micon believes that the insertion of at least two standards in each sample batch and the monitoring of the analytical results by an independent consultant (i.e. Ms. Tracy Armstrong, P. Geo. – see Section 14) add confidence that the assays reported are reliable.

Given that down-hole surveys were conducted using appropriate methodology and equipment, and that core recoveries were good as described in Section 11, there are no factors known to Micon which might materially impact on the reliability of the results reported by Spider/KWG. The down-hole surveys and good core recoveries also ensured that samples are representative of the deposit.

A summary of the results of the composite samples is given in Table 11.2.

Figure 12.1

Sealed Rice Bags Being Placed into Pails

13.0 SAMPLE PREPARATION, ANALYSES AND SECURITY

All on-site at McFaulds Lake sample handling and preparation were carried out by Billiken Management Services under the supervision of Qualified Persons (Lahti and Chance). At no time were employees, officers, directors or agents of Spider, KWG or Freewest involved in the sample selection, preparation and shipping process beyond exercising oversight to ensure that established protocols were being observed.

13.1 QUALITY CONTROL MEASURES BEFORE DISPATCH OF SAMPLES

13.1.1 Pre-2008 Drill holes and Samples

All pre-2008 drill holes and samples were purely of a reconnaissance nature designed to test geophysical anomalies for a variety of metals and no specific QA/QC measures were instituted for those samples.

13.1.2 2008 Analyses

During the 2008 drilling and sampling campaign, Howard Lahti, PhD, P. Geo. instituted an initial QA/QC program which involved inserting split duplicates and blanks in the sample stream.

13.1.3 2009-2010 Analyses

In March, 2009, Spider retained Tracy Armstrong, P. Geo., to institute a comprehensive QA/QC program which was achieved in two parts. First, samples were assigned to specific positions in batches of 35, leaving space for the laboratory to insert internal controls. Company control samples comprised two or three certified standards (Table 13.1), a project “blank”, split, coarse reject and pulp duplicates. There were typically six QA/QC samples in each batch of 35.

Table 13.1

Standards Used During 2009/2010 Drilling and Re-sampling Programs

Standard	Cr2O3 (%)	Ni (%)	Pb (ppb)	Pt (ppb)	Au (ppb)	Source
OREAS 73A	1.69*	1.41	78	64	14	Ore Research, Australia
SARM 8	48.90					Mintek, South Africa
BD-1	21.60	0.124	182	177		CDN Resource Lab (custom)
BD-2	30.23	0.001	232	261	10.6	CDN Resource Lab (custom)
BD-3	40.75	0.097	234	197		CDN Resource Lab (custom)
PGMS 16			4,660	1,230	1120	CDN Resource Lab (custom)

* Cr (acid digestion)

Other than the insertion of QA/QC samples into sample batches, packing and dispatching the batches from McFaulds Lake, no other task was performed by employees of Billiken.

13.2 LABORATORY DETAILS

All Cr2O3 analyses completed in 2009 and 2010 were carried out by Activation Laboratories Ltd. (Actlabs) the principal office of which is in Ancaster, Ontario. Since February 27, 1998 Actlabs has been certified (accredited laboratory number 266) by the Standards Council of Canada as a mineral analysis laboratory with specific ability to analyze Cr2O3 by XRF fusion as follows:

“Fusion XRF using PHILIPS PW 2400 XRF Spectrometer (Quantify 15 analytes by X-ray Fluorescence which are fused with lithium and reported in the oxide form - SiO2, Al2O3, Fe2O3, MnO, MgO, CaO, Na2O, K2O, TiO2, P2O5, Cr2O3, Co3O4, NiO, Zn, Sn and Cu).” (source: www.actlabs.com).

13.3 SAMPLE PREPARATION

In 2009 and 2010 sample preparation, ICP and fire assays were completed at Actlabs Thunder Bay facility. The material pulps were shipped by bonded courier to ActLabs, Ancaster laboratory for XRF analysis.

The following summary on sample preparation was provided by Actlabs, Thunder Bay: The entire sample is crushed to a nominal minus 10 mesh (1.7 mm), mechanically split (riffle) to obtain a representative sample (about 500 g) and then pulverized to at least 95 % minus 150 mesh (105 microns). (source: www.actlabs.com).

13.4 ANALYSES

Table 13.2 summarizes the sources of Cr/Cr2O3 data in the database. However, only the INAA and XRF results are used in the resource estimate. The large number of ICP analyses reflect the effort made to find potential PGE-enriched intervals for which geochemical evidence suggests reasonable potential. The evolution of analytical methods used reflects the growth of the project from Cu-Zn, through Ni-Cu-PGE to chrome.

Table 13.2

Summary of Cr and Cr2O3 Analyses by Method

Method	Count
ICP	5,662
INAA (only)	613
INAA + XRF	377
XRF (only)	2,359

Note: The ICP count includes 505 samples taken from holes that did not intersect the sill.

13.4.1 2006/2008 Analyses

Sample pulps were shipped to Ancaster where all were analyzed by ICP using a four acid digestion (Actlabs Method 1F2, Total Digestion – ICP; Table 13.3). Designated and ICP over-limit samples were analyzed for nickel and copper by Optical Emission Spectrometry (ICP-OES). Precious metals (Au, Pd and Pt) were determined by ICP analysis of a fire assay bead. Samples reporting >1% Cr by ICP were re-analyzed by Instrumental Neutron Activation Analysis (INAA).

13.4.2 2009/2010 Cr2O3 Analyses

In early 2009, following a QA/QC review by Tracy Armstrong, XRF analysis of fused borate disks was adopted as the method of choice due to shorter turn-around times, greater laboratory capacity and delivery of the major element oxides and loss on ignition (LOI). A summary of the 2009/2010 analytical procedures is presented in Table 13.3.

Table 13.3

Analytical Methods for 2009-2010 Drilling and Resampling Programs

Code	Method	Description
RX1	Sample preparation	Crush (<5kg > up to 75% passing 2 mm (coarse reject), split (250 g) and pulverize (hardened steel) to 95% passing 105 μ (pulp).
1F2	Total Digestion - ICP	A 0.25 g sample is successively digested with hydrofluoric, nitric and perchloric and finally hydrochloric acids. Chromite is partially solubilized. Analysis by Varian Vista ICP.
1C	Exploration - Fire Assay -Au,Pd,Pt-ICP/MS	A 30 g (may be 5 to 50 gram) sample is fired to 1060 °C with fluxes (borax, soda ash, silica, litharge) and an Ag collector for a hour. The lead button is cupelled at 950°C to recover the Ag (doré bead), acid digested and the solution analyzed for Au, Pt, Pd by ICP/MS. Smaller sample splits are used for high chromite or sulphide samples to ensure proper fluxing and metal recoveries. LDL’s & UDL’s are 1 ppb & 30 g/t repectively.
4C	XRF Fusion – XRF	The sample is roasted 1050°C for 2 hours (from which LOI is determined), a glass is formed by fluxing a portion of the roasted material with lithium borate flux. The glass is analyzed on a Panalytical Axios Advanced wavelength dispersive XRF. The limit of detection is about 0.01 wt% for most of the elements including Cr2O3.

Source: http://www.actlabs.com/list.aspx. (30 March 2010)

13.4.3 INAA versus Fusion XRF

Prior to 2009 INAA was the analytical method of choice due to perceived problems with fusions and limitations of acid digestions. XRF analysis of borate glass disks was adopted as a result of limited reactor capacity (required to irradiate samples), slow turn around time due to the delay between irradiation and counting and the importance of other major element oxides in characterizing potentially marketable products. These changes reflected the suggestions of a chromite expert (S. McQuade, personal communication, 2009).

Some cross-check analyses conducted under the supervision of independent consultant Tracy Armstrong, P. Geo., showed that the INNA and Fusion-XRF methods yielded the same result for Cr2O3. However, other than the problems associated with INAA already mentioned above, the latter was more preferable as it gave a quicker turn around.

13.4.4 Laboratory In-house QA/QC

The ActLabs in-house analytical QA/QC procedures include the following:

	·	Use of certified reference materials.
	·	Routine duplicate analyses.
	·	Use of blanks.
	·	Participation in round robin analytical exercises.

13.5 SECURITY

A chain of custody was maintained on dispatching the samples to the laboratory. Samples were shipped in complete batches (typically three pails) by backhaul flights to Nakina where they were stored in Nakina Air Services’ secure warehouse before being shipped by bonded carrier to Actlabs facility in Thunder Bay.

Upon receipt of the samples in Thunder Bay, ActLabs personnel verified that seals were intact, checked the samples against the included packing slip and entered the batch into LIMS and forwarded a batch receipt, including the batch work order, to the sender, Ms. Armstrong, the client and Billiken’s management and database manager. Any discrepancies were checked with the source prior to entry into LIMS. The laboratory’s performance on control samples was monitored on a batch by batch basis by Tracy Armstrong, P.Geo. Ms. Armstrong “green-lighted” batches as received and compiled her analyses in reports issued approximately monthly and sent to Spider and copied to Billiken. An example of Ms. Armstrong’s reports is in Appendix 2.

Micon Comments

Micon is satisfied that the sample preparation, security and analytical procedures follow the current CIM exploration best practices guide lines. This ensures credibility of the analytical results used for the resource estimate.

14.0 DATA VERIFICATION

14.1 INTRODUCTION

The data verification conducted by Micon comprised four separate phases as follows:

	·	Laboratory visit.

	·	Site visit to the Big Daddy chrome project area at the close of the initial 2008 drilling phase.

	·	Site visit to the Big Daddy chrome project area during the latter half of the 2009/2010 drilling campaign.

	·	Resource database validation prior to conducting the resource estimate.

The first two items above were completed in conjunction with the previous 43-101 report (Gowans and Murahwi, 2009). The second two items support the current report and are described below.

14.2 SITE VISIT (OCTOBER, 2009)

14.2.1 Overview

Micon conducted a second site visit to the Big Daddy chromite project area on October 22, 2009 primarily to review QA/QC procedures, the construction of the resource database and at the same time to provide guidance in geotechnical logging of drill cores. In line with Micon’s recommendations contained in the March 31, 2009 Technical Report, the SKF project personnel were found to have introduced stringent QA/QC measures under the guidance of QA/QC specialist Tracy Armstrong, P. Geo. These measures include the use of standards (certified reference materials) and blanks and monitoring of the performance of the standards and blanks on a real time basis. Ms. Armstrong also carried out a random selection of some pulps of the earlier (2008) analyses for repeat analyses.

14.2.2 SG Determinations

Another important component for the second site visit was verification of the tonnage factor.

Specific gravities were determined using a Totalcomp strain gauge attached to a control unit generally following ASTM standard D5779 – 08. The strain gauge (Figure 14.1) was attached to a bracket on a length of casing driven into the overburden and thus isolated from the core shack floor. A basket allowed pieces of core to be suspended in air and then in water.

The operator selected intact pieces of core from each sample interval determined, numbering them in advance to aid correct replacement in the core tray. The apparatus was well damped such that the mass settled to ±0.001 kg in less than a couple of seconds. The masses in air and water were entered in a customized spreadsheet into which a correction for the buoyancy of the apparatus in water was inserted, the mass in air having been tared out. Initially the specific gravities of all mineralized intervals and adjacent wallrock were determined. Over the course of the project the frequency was reduced to every third mineralized and sixth unmineralized interval with additional determinations across grade changes. A total of 2,216 observations were eventually made.

Figure 14.1

Technician Working the Totalcomp Strain Gauge

14.3 RESOURCE DATABASE VALDATION

The resource database validation conducted by Micon involved the following steps:

	·	Checking for any non-conforming assay information such as duplicate samples and missing sample numbers.

	·	Verifying collar elevations against survey information for each drill hole.

	·	Verifying collar coordinates against survey information for each drill hole.

	·	Verifying the dip and azimuth against survey information for each hole.

	·	Comparing the database assays and intervals against the original assay certificates and drill logs.

Some minor discrepancies were noted with duplication of sample intervals where duplicate analyses had been conducted. The necessary corrections were made.

14.4 CONCLUSIONS ON DATA VERIFICATION

Based on the foregoing data verification exercises, Micon is satisfied that the database used for the resource estimate in this Technical Report was generated in a credible manner and is representative of the main characteristics of the Big Daddy chromite deposit.

As described in its 2009 Technical Report, Micon had previously taken samples of core and of assay rejects which confirmed the presence of chromite at the grades reported for the Big Daddy deposit.

15.0 ADJACENT PROPERTIES

The following is a description of the properties adjacent to and within the environs of the Big Daddy deposit (Figure 15.1). The resources quoted below, with the exception of Black Thor, are taken from NI 43-101 compliant reports filed on SEDAR. The Black Thor estimate was reported in a press release (January 14, 2010) and the report, which states that it is NI 43-101 compliant, was obtained from Freewest’s website in late January, 2010.

Micon has not independently verified the information contained in this section. Micon notes that the information is not necessarily indicative of the character and tenor of mineralization on the Big Daddy property.

15.1 CHROMITE

15.1.1 Black Thor / Black Label

The Black Thor and Black Label chromite deposits (owned by Freewest) are approximately 3 km northeast of the Big Daddy deposit. In early December, 2009 Freewest announced an initial resource estimate on its Black Thor and Black Label chromite properties (Table 15.1).

Table 15.1

Resource Estimate by the Sibley Basin Group Ltd. (A. Aubut, 2009)

All resources are in the inferred category

Tonnes	Grade	Cut-Off
(millions)	% Cr2O3	(%Cr2O3)
121.9	27.8	20
69.6	31.9	25
36.1	36.1	30
16.7	40.5	35

15.1.2 Black Creek

The Black Creek chromite deposit is adjacent to the Big Daddy deposit. During the second half of 2009, the Probe Mines/Noront Resources joint venture completed 20 holes along a 200 m long gravity anomaly situated in the southeast corner of claim P 4208219. Eleven holes (1,706 m) were drilled towards the northwest on five lines spaced 50 m apart and were completed to between 150 m and 175 m below surface (Probe, 2009; Noront, 2010).

The results of fifteen holes drilled from southeast to northwest (Table 15.2) describe a higher grade interval overlying a lower, less consistently mineralized footwall to the north. These data suggest that the deposit is comparable to the Big Daddy deposit which is the subject of this report.

Table 15.2

Black Creek intersections (Probe Mines Ltd, 2009)

Drill Hole	Section	From (m)	To (m)	Width (m)	Cr2O3 (%)	Cr:Fe
MJV09-18	0E	37.2	66.4	29.2	32.0
including		37.2	54.3	17.1	41.6
MJV09-19	0E	102.0	142.5	40.5	19.5
including		102.0	116.5	14.5	30.0
MJV09-20	0E	122.9	138.2	15.3	35.6
including		124.0	131.5	7.5	40.0
MJV09-10	50E	52.0	95.0	43.0	26.3
including		52.0	67.0	15.0	36.1
MJV09-03	50E	148.6	188.7	40.1	37.4	1.7
including		149.0	174.0	25.0	41.0	1.8
MJV09-04	50E	173.0	202.3	29.3	39.2	1.8
including		173.5	199.1	25.6	42.7	1.9
MJV09-12	100E	131.7	174.3	42.6	34.6
including		131.7	153.4	21.7	43.1
also including		166.8	174.3	7.5	41.2
MJV09-13	100E	158.7	222.3	63.6	33.9
including		158.7	193.4	34.7	41.4
MJV09-14	100E	56.2	95.5	39.3	36.8
including		56.2	80.4	24.2	42.8
MJV09-11	150E	44.0	78.5	34.5	33.8
including		44.0	65.0	21.0	37.4
also including		44.0	59.0	15.0	43.7
MJV09-05	150E	123.8	174.4	50.6	32.2	1.6
including		123.8	146.0	22.2	43.1	2.0
also including		164.4	171.4	7.0	40.3	1.9
MJV09-06	150E	160.0	224.4	62.4	34.5	1.6
including		160.0	194.0	34.0	41.4	1.8
also including		214.0	222.4	8.4	43.4	1.7
MJV09-17	200E	51.4	82.0	30.6	28.2
including		51.4	63.5	12.1	40.5
MJV09-15	200E	107.0	132.0	25.0	34.8
including		107.0	119.4	12.4	43.7
MJV09-16	200E	164.0	204.0	40.0	32.0
including		164.0	173.0	9.0	42.4

15.1.3 Blackbird

Noront Resources’ Blackbird 1 and 2 chromite deposits are located about 6 km to the southwest of the Big Daddy deposit. The resource estimate is based on 82 diamond drill holes (out of 154 drilled) completed on a 50 m grid. The database included 13,564 samples taken over 11,700 m of core. The area drilled extended along a 1,600 m portion of the sill

over a 1,600 m width. Six mineralized zones have been outlined in an 1,100 m long by 800 m wide portion of drilled area, with estimated resources as shown in Table 15.3.

Table 15.3

Summary of Blackbird resource showing all categories (Micon, 2010)

Description	Category	Tonnes x 106	Avg. %Cr2O3	Cr:Fe
BB2 Massive Chromite	Measured(M)	4.2	36.55	1.94
BB1 & BB2 Massive Chromite	Indicated (I)	3.4	36.08	1.94
BB1 & BB2 Massive Chromite	Total M & I	7.6	36.34	1.94

BB2 Massive Chromite	Total Inferred	3.5	34.93	1.95

BB2 Intercalated Chromite	Measured (M)	1.0	25.40	1.6
BB2 Intercalated Chromite	Indicated (I)	0.3	26.00	1.57
BB2 Intercalated Chromite	Total (M & I)	1.3	25.54	1.6

BB2 Intercalated Chromite	Total Inferred	2.6	31.39	1.77

15.2 Fe-Va-Ti (THUNDERBIRD)

In 2009 Noront Resources tested a prominent magnetic anomaly lying about 2 km northeast of the Freewest-Cliffs property (Figure 15.1). Three shallow holes reported about 0.5% vanadium (V2O5) in three ~30 m wide intersections over 900 metres of strike in ferrogabbro. The company suggests that the ferrogabbro is a more evolved portion of the McFaulds Sill.

15.3 MAGMATIC MASSIVE SULPHIDES (Ni-Cu-PGE) – EAGLE ONE

Noront Resources’ (Golder Associates, 2010) current resource estimate describes mineralization as being 30 m thick, extending 125 m along strike and defined to 1,200 m below surface. Elsewhere, the company describes a series of lenses (1B, 1C, 1D, etc.,) (Noront, 2009) or informally, a “string of pearls”. See Table 15.4.

The deposit is reported to be contained in a narrow feeder dyke to the McFaulds sill. The discovery was made in 2007 when Noront gained access to the property and tested coincident airborne EM and magnetic anomalies thought to be similar to those at over the McFaulds VMS deposits.

Table 15.4

Eagles Nest Resource Estimate (Golder Associates, 2010) Indicated and Inferred

Indicated
CUTOFF (Ni %)	TONNES	Ni %	Cu %	Pt gpt	Pd gpt	Au gpt	Ag gpt
0.5	5,943,512	2.31	1.08	1.45	3.82	0.18	3.08
1	4,841,619	2.67	1.23	1.64	4.35	0.20	3.47
2	2,299,495	3.98	1.71	2.28	6.03	0.24	4.50
3	1,250,402	5.31	2.16	2.80	7.63	0.28	5.45
4	842,337	6.21	2.52	2.81	8.90	0.33	6.31
5	600,292	6.91	2.82	2.90	9.94	0.38	6.97
6	399,372	7.64	3.17	2.92	11.09	0.44	7.79
7	259,562	8.24	3.36	2.80	11.96	0.50	8.26

Inferred
	CUTOFF (Ni %)	TONNES	Ni %	Cu %	Pt gpt	Pd gpt	Au gpt	Ag gpt
	0.5	4,050,123	1.50	0.91	0.83	3.60	0.25	3.54
	1	2,650,781	1.88	1.11	0.90	4.21	0.28	4.24
	2	685,490	3.28	1.25	0.71	5.39	0.21	4.80
	3	280,372	4.60	1.17	0.56	6.33	0.14	4.32
	4	164,931	5.40	1.19	0.52	7.14	0.12	4.43
	5	91,834	6.12	1.22	0.47	7.93	0.10	4.62
	6	44,672	6.81	1.21	0.45	8.81	0.05	4.90
	7	15,870	7.52	1.15	0.42	9.22	0.05	4.69

15.4 VOLCANOGENIC MASSIVE SULPHIDES (CU-ZN) – MCFAULDS

DEPOSITS

In 2002 De Beers Canada discovered sulphides in a reverse circulation hole testing an isolated magnetic anomaly immediately to the north of McFaulds Lake. Spider and KWG drilled the McFaulds #1 and #3 prospects in sufficient detail to estimate resources on each deposit (Lahti, 2008). (See Table 15.5).

Table 15.5

Summary of Resources on McFaulds 1 and 3 (reported by Lahti, 2008)

Deposit	Class	t	Cu (%)	Zn (%)	Cut off	DDH	Drilled (m)
McFaulds 3	Indicated	802,000	3.75	1.10	1.5% CuEquiv	39	12,114
McFaulds 1	Inferred	279,000	2.13	0.58.	1.5% CuEquiv	15	4,715

Figure 15.1

Claim Map of the McFaulds Lake Area (as of 22 April 2010)

The SKF property is the multi-hatched area at the centre of the map

Other than the De Beers Victor diamond mine located approximately 100 km to the east, there are no producing mines in the James Bay Lowlands.

16.0 MINERAL PROCESSING AND METALLURGICAL TESTING

Two phases of preliminary metallurgical testing have been completed using samples from the Big Daddy chromite deposit. The first phase comprised preliminary mineralogical, chemical and beneficiation testing by World Industrial Minerals, Arvada, Colorado, USA (WIM) in 2008.

The second phase consisted of a mineralogical and metallurgical test program undertaken by SGS Lakefield Research Limited, Lakefield, Ontario, Canada (SGS) in 2009. The metallurgical program completed by SGS was scoping in nature. It was designed to provide a preliminary indication of the metallurgical performance with regard to chromite recovery and upgrading potential of the Big Daddy mineralization.

16.1 METALLURGICAL SAMPLES

In July, 2008, quarter core samples taken from drill hole FW-08-05 were submitted to World Industrial Minerals (WIM) in Arvada, Colorado. Eight samples comprising two intervals (264.0 to 268.5 and 292 to 297 m) were tested.

Micon and Spider jointly selected the metallurgical samples in January, 2009 for the SGS test program. Eight composite metallurgical samples and twenty microprobe samples were prepared under the supervision of the Billiken’s geological site team. Table 16.1 shows the sources of the metallurgical samples.

Table 16.1

SGS-L Metallurgical Samples

Sample ID	Drill Hole	No. of Intervals	Core Length (m)
Sample 2	FW-08-06	17	25.80
Sample 3	FW-08-23	17	25.50
Sample 4	FW-08-15	17	25.50
Sample 5	FW-08-18	16	24.00
Sample 6	FW-08-13	17	25.15
Sample 7	FW-08-22	16	24.35
Sample 8	FW-08-14	17	25.25
Sample 9	FW-08-12	16	20.80

The eight metallurgical composite samples, comprising split quarter drill core, were crushed, blended, assayed and tested to investigate chromite recovery and upgrading potential.

A total of 20 samples were selected for Electron Microprobe Probe Analysis (EPMA) of chromite grains identified in thin sections prepared from drill core samples. Samples were selected from drill holes FW-08-05, FW-08-12, FW-08-13, FW-08-18 and FW-08-21.

16.2 MINERALOGICAL AND CHEMICAL ANALYSIS

16.2.1 WIM Preliminary Test Program

The eight samples were submitted to DCM Science Laboratory Inc. of Wheat Ridge Colorado (DCM) for x-ray diffraction (XRD) analysis and The Mineral Lab. Inc., of Lakewood, Colorado for x-ray fluorescence (XRF) analysis. DCM also completed a petrographic study of the samples.

A summary of the XRD analytical results is presented in Table 16.2.

Table 16.2

Summary of XRD Analysis Results

Phase	17204	172405	172406	172426	172427	172428	172429	172430
Amphibole	-	-	8%	-	-	-	-	-
Chlorite	45%	45%	32%	37%	38%	36%	41%	34%
Pyroxene	5%	3%	-	-	-	-	-	-
Chromite	48%	51%	52%	61%	58%	60%	55%	50%
Talc	-	-	6%	-	2%	2%	1%	13%
Unaccounted	<5%	<5%	<5%	<5%	<5%	<5%	<5%	<5%

A summary of the XRF analytical results is presented in Table 16.3. Only elements and compounds with values above the instrument detection limit are included in the table.

Table 16.3

Summary of XRF Analysis Results

Element /Compound	Units	17204	172405	172406	172426	172427	172428	172429	172430
MgO	%	28	27	24	24	24	23	24	24
Al2O3	%	7	9	8	12	11	11	12	10
SiO2	%	25	22	23	16	18	16	18	23
CaO	%	2.1	1.2	1.5	<0.1	<0.1	<0.1	<0.1	<0.1
TiO2	%	0.3	0.3	0.4	0.4	0.3	0.3	0.4	0.3
MnO	%	0.2	0.2	0.1	0.2	0.3	0.3	0.3	0.3
Fe2O3	%	12	14	14	17	16	18	17	16
V	ppm	635	690	744	785	791	864	804	842
Cr	ppm	180,000	190,000	200,000	230,000	220,000	230,000	210,000	190,000
Co	ppm	135	142	162	176	170	174	155	176
Ni	ppm	1,320	825	1,040	1,120	1,070	921	1,130	819
Zn	ppm	316	348	403	529	518	540	499	567

As XRF analyses indicate that the chrome contents are between 18% and 23%, which corresponds to calculated chromite (Cr2O3) values of between 26% and 34%.

It is noted that the XRF analysis did not include PGM’s, such as Pd, Pt and Rh.

The petrographic analysis showed that chromite grains were generally discrete and high grade. The grains typically had subhedral to euhedral shape and measured from 50 μm to

750 μm in size. The chromite grains tended to be of very high purity and no deleterious inclusions were identified.

The matrix containing the chromite grains is composed of altered chlorite and talc and the mineralogical investigations suggest that chromite could be liberated and recovered using standard mineral processing technology.

16.2.2 SGS-L Preliminary Testwork Program

Metallurgical Samples

Detailed analyses of the SGS-L metallurgical samples are included in Table 16.4.

Table 16.4

SGS-L Metallurgical Sample Chemical Analyses

Sample ID	Sample 2	Sample 3	Sample 4	Sample 5	Sample 6	Sample 7	Sample 8	Sample 9
Cr2O3 % 2	3.99	7.85	10.1	20.2	35.5	43.3	40.2	34.1
Cr %	2.73	5.37	6.91	13.8	24.3	29.6	27.5	23.3
Fe %	8.46	10.0	9.79	12.4	17.9	15.2	14.2	17.0
Cr:Fe Ratio	0.32	0.54	0.71	1.12	1.36	1.95	1.94	1.37
SiO2 %	35.6	30.6	30.5	22.9	11.8	8.29	10.1	12.4
Al2O3 %	2.42	2.87	4.58	7.46	12.5	13.3	13.5	11.8
Fe2O3 %	12.1	14.3	14	17.7	25.6	21.7	20.3	24.3
MgO %	28.6	32.8	30.2	23.4	12.3	13.8	13.8	14.3
CaO %	2.54	0.39	0.23	0.79	0.23	0.09	1.23	0.23
Na2O %	0.03	0.03	0.05	0.07	0.07	0.07	0.08	0.085
K2O %	< 0.01	< 0.01	0.03	0.08	0.11	0.05	0.2	0.010
TiO2 %	0.11	0.1	0.17	0.33	0.53	0.42	0.45	0.40
P2O5 %	< 0.01	< 0.01	< 0.01	0.07	< 0.01	< 0.01	< 0.01	0.010
MnO %	0.16	0.07	0.11	0.16	0.4	0.21	0.26	0.31
Cr2O3 %	3.99	7.85	10.1	---	---	---	---	---
V2O5 %	0.03	0.03	0.05	0.11	0.18	0.17	0.16	0.14
LOI %	14	11.4	9.13	6.34	1.77	0.64	0.33	2.35
Sum %	99.6	100.4	99.1	---	---	---	---	---
Ni %	0.14	0.14	0.14	0.14	0.093	0.11	0.11	0.12
S %	0.15	0.06	0.08	0.22	0.05	0.04	0.03	0.075
Au g/t	0.07	0.02	< 0.02	0.07	0.03	0.03	0.03	0.07
Pt g/t	0.09	0.06	0.14	0.25	0.22	0.19	0.15	0.215
Pd g/t	0.16	0.08	0.23	0.26	0.32	0.14	0.1	0.41
Cr2O3 % 2	---	---	---	20.2	35.5	43.3	40.2	34.05
Fe3O4 % 1	2.2	5.4	2.9	0.6	0	0	0	0

1 Magnetic iron minerals using a Satmagan analyzer.

2 SGS noted that chromite minerals are often difficult to digest when submitted for chemical analyses. For this test program, SGS used fusion for the digestion of the samples. Borate fusion was used for the whole rock assay suite (WRA), followed by x-ray fluorescence (XRF) analysis. For samples with greater than 15% Cr2O3 content the samples were submitted for a re-assay using a Na2O2 fusion, followed by analysis by atomic absorption (AA).

Microprobe Analyses (EPMA)

A summary of the EPMA test results is presented in Table 16.5.

Microprobe work on 20 samples show that the Cr:Fe ratio of the chromite grains sampled ranges from 1.0 to 1.9. These ratios are lower than expected. The work also shows that the chromite grains are low in SiO2 (<0.1%), contain about 14% Al2O3 and that there is a negative correlation between MgO and Fe. This is expected considering that the spinel structure of chromite generally has a positive correlation between Cr:Fe ratio and MgO content. This work also suggests a higher Cr:Fe ratio for the chromite grains for higher grade chromite samples.

Figure 16.1 compares the Cr:Fe ratio to the Al2O3 and MgO analysis. Figure 16.2 plots the FeO and MgO analyses against Cr2O3 and shows that as the MgO content of the chromite tends to increase when the Cr:Fe ratio increases. This is probably due to the spinel nature of the chromite and the substitution of Fe with Mg.

Figure 16.1

EPMA Samples, Cr:Fe Ratio vs Al2O3 and MgO

Table 16.5

SGS-L EPMA Results

(All Units are Percent)

Sample	Cr2O3	Fe2O3	FeO	Cr:Fe ratio	SiO2	TiO2	Al2O3	MgO	CaO	MnO	NiO	Na2O	Total
PS 5-1	51.9	3.95	20.8	1.87	0.12	0.37	13.8	8.69	0.005	0.20	0.061	0.011	100.0
PS 5-2	51.3	4.42	19.7	1.90	0.001	0.45	14.7	9.82	0.005	0.17	0.058	0.014	101
PS 5-3	50.2	3.41	27.4	1.45	0.037	0.62	13.7	4.52	0.009	0.53	0.033	0.023	101
Ave 5	51.1	3.93	22.7	1.74	0.053	0.48	14.1	7.68	0.006	0.30	0.050	0.016	100
PS 12-1	48.3	7.54	29.7	1.17	0.059	1.49	9.98	3.26	0.001	0.41	0.090	0.005	101
PS 12-2	50.6	4.12	22.6	1.69	0.15	0.42	14.1	7.63	0.002	0.22	0.092	0.017	100.0
PS 12-3	47.7	5.27	27.8	1.29	0.095	0.70	13.7	4.28	0.002	0.36	0.057	0.010	100.0
PS 12-4	47.7	3.83	29.1	1.29	0.051	0.54	14.3	3.26	0.002	0.38	0.008	0.023	99.2
Ave 12	48.6	5.19	27.3	1.36	0.089	0.79	13.0	4.61	0.002	0.34	0.062	0.014	100
PS 13-1	46.4	12.1	30.2	1.0	0.063	0.82	7.40	1.95	0.005	0.44	0.020	0.025	99.5
PS 13-2	51.3	3.91	21.6	1.80	0.034	0.45	14.1	8.33	0.000	0.35	0.037	0.015	100
PS 13-3	50.7	3.62	23.7	1.66	0.052	0.47	13.8	6.85	0.000	0.35	0.009	0.028	99.6
PS 13-4	46.4	5.04	29.2	1.21	0.055	0.61	14.3	3.20	0.002	0.37	0.010	0.021	99.2
Ave 13	48.7	6.17	26.2	1.42	0.051	0.59	12.4	5.08	0.002	0.38	0.019	0.022	100
PS 18-1	45.4	5.80	27.5	1.22	0.044	0.69	15.1	4.54	0.004	0.35	0.16	0.008	99.6
PS 18-2	50.3	3.68	26.2	1.50	0.061	0.40	14.1	5.43	0.000	0.21	0.042	0.010	100
PS 18-3	50.1	5.28	20.0	1.78	0.049	0.44	14.5	9.43	0.000	0.21	0.098	0.001	100
PS 18-4	49.4	5.83	21.3	1.64	0.046	0.44	14.2	8.42	0.003	0.47	0.17	0.003	100
Ave 18	48.8	5.15	23.8	1.53	0.050	0.49	14.5	6.95	0.002	0.31	0.116	0.005	100
PS 21-1	50.2	5.37	26.3	1.42	0.061	0.46	12.2	4.96	0.005	0.46	0.17	0.009	100
PS 21-2	43.6	8.38	30.0	1.02	0.042	1.26	13.4	3.28	0.003	0.27	0.070	0.000	100
PS 21-3	48.7	4.92	25.9	1.42	0.054	0.54	14.4	5.75	0.003	0.24	0.055	0.025	101
PS 21-4	50.0	4.23	25.6	1.50	0.038	0.47	13.8	5.77	0.004	0.27	0.067	0.021	100
PS 21-5	46.4	5.45	29.4	1.19	0.075	0.64	14.7	3.54	0.000	0.25	0.037	0.016	100
Ave 21	47.8	47.79	47.8	47.79	47.792	47.79	47.8	47.79	47.792	47.79	47.792	47.792	48

Figure 16.2

EPMA Samples, Cr2O3 Grade vs MgO and FeO

16.3 METALLURGICAL TESTING

16.3.1 WIM Preliminary Test Program

Metallurgical testing on the Big Daddy composite sample was performed by Phillips Enterprises LLC of Golden, Colorado. The scope of this preliminary testwork program included gravity separation and flotation of ground material. The work was scoping in nature and significant improvements in results would be expected from more detailed studies.

Table 16.6 provides a summary of the scoping testwork results. These results are based on chemical analyses, which are generally more accurate for chromite determination than the XRF method.

Table 16.6

Summary of Metallurgical Test Results

Product	Chromite Grade (%)	Chromite Distribution (%)
Gravity concentrate	49	47
Flotation concentrate	43	28
Combined concentrate	47	74
Total Tailings	10	26
Feed	37	100

An XRF analysis of the combined concentrate is compared to the average feed analysis in Table 16.7.

Table 16.7

Average Feed and Combined Concentrate XRF Analyses

Stream	MgO (%)	Al2O3 (%)	SiO2 (%)	CaO (%)	TiO2 (%)	MnO (%)	Fe2O3 (%)	V (ppm)	Cr (ppm)	Co (ppm)	Ni (ppm)	Zn (ppm)
Feed	24	11	19	1.6	0.3	0.3	17	814	211,250	167	994	518
Conc.	18	10	11	0.2	0.5	0.2	22	954	280,000	221	761	652

Using the XRF analyses presented in Table 16.7, the calculated Cr to Fe ratio of both the average feed and combined concentrate is 1.83. However, using wet chemical methods to analyze for Cr2O3, which is more accurate than XRF due to potential incomplete dissolution of chromium using the XRF method, the value of Cr2O3 of 46.6% for the combined concentrate equates to a Cr to Fe ratio of 2.07.

Of note is the 11% SiO2 assay of the combined concentrate which would preclude this product from some of the main chromite markets. However, mineralogical analyses suggest that the chromite grains are relatively pure, therefore additional liberation studies and metallurgical testing would most likely reduce this to an industry acceptable level.

16.3.2 SGS Preliminary Testwork Program

Metallurgical testwork on all eight composite samples comprised gravity separation tests and magnetic separation tests on fine gravity tailings. This work was designed to investigate the upgrading potential of the Big Daddy chromite samples.

In order to ascertain the pre-concentration potential, coarse separation tests (-½ inch) using heavy liquid separation (HLS) and magnetic separation were undertaken on two selected composites. Samples 6 and 9 were selected for these tests.

A scoping sulphide flotation test was undertaken to investigate sulphide-hosted base metals and PGM recoveries.

Gravity and Magnetic Separation

The gravity/magnetic separation test flowsheet developed by SGS is presented in Figure 16.3. This procedure had the following steps.

	·	The test sample is crushed to pass 20 mesh (850 μm).

	·	In order to enhance recovery as well as upgrading, the crushed sample is then split into three size fractions: 850 x 300 μm, 300 x 75 μm and -75 μm.

	·	The two coarsest sizes were passed over a Wilfley shaking table and the concentrates were processed on a Mozley mineral separator or a superpanner to further upgrade the heavy concentrate.

	·	To try and recover non-liberated chromite from the coarse gravity separation tailings, they were stage-ground to pass a 75 μm screen and combined with the original -75 μm fraction.

	·	Shaking table separation followed by the Mozley mineral separator or superpanner was used to produce a gravity concentrate from the -75 μm material.

	·	A sub-sample from the fine tailings was tested for chromite recovery by wet high-intensity magnetic separation [WHIMS].

	·	It is noted that prior to each gravity separation, the magnetic iron minerals were removed by low-intensity magnetic separation [LIMS].

Figure 16.3

SGS Gravity and Magnetic Separation Test Flowsheet

The results from the gravity/magnetic separation tests are summarized in Table 16.8 and Table 16.9.

Table 16.8

Gravity/Magnetic Separation Test Results – 1

Sample	Feed		+75 μ Grav Conc			-75 μ Grav Conc			Low-Intensity Magn.		High-Intensity Magnetics
	Assay, %	Ratio	Cr2O3, %		Ratio	Cr2O3, %		Ratio	Cr2O3, %		Cr2O3, %		Ratio
	Cr2O3	Cr:Fe	Grade	Recovery	Cr:Fe	Grade	Recovery	Cr:Fe	Grade	Recovery	Grade	Recovery	Cr:Fe
2	4.42	0.35	37.0	5.93	0.83	34.8	4.34	0.77	14.0	56.2	7.05	16.8	0.32
3	7.96	0.56	42.5	1.57	1.28	41.4	1.79	1.09	11.2	92.2	1.96	2.06	0.29
4	12.3	0.76	41.2	11.4	1.26	42.7	7.55	1.19	16.2	65.7	7.20	8.21	0.67
5	20.4	1.17	44.8	22.4	1.47	46.8	25.5	1.49	14.9	7.20	20.5	13.5	1.17
6	35.4	1.35	44.3	57.2	1.37	47.3	19.5	1.37	23.0	0.32	40.8	8.87	1.37
7	42.9	1.88	49.0	51.6	1.89	50.3	4.10	1.89	32.5	0.53	47.6	32.0	1.90
8	40.0	1.96	47.3	52.9	2.02	51.2	16.9	2.10	28.3	0.63	46.4	23.2	1.88
9	34.8	1.43	46.3	33.2	1.43	47.5	10.7	1.39	28.2	0.78	42.0	15.0	1.37

Table 16.9

Gravity/Magnetic Separation Test Results – 2

Sample	Product	Weight	Assays (%)			Distribution (%)
		%	Cr203	S	Si02	Cr203	S
Sample 2	Gravity Conc +75μm	0.71	37.0	2.96	2.93	5.93	1.92
	Gravity Conc -75 μm	0.55	34.8	0.29	1.44	4.34	0.15
	LI Magnetic Fraction	17.8	14.0	0.14	23.6	56.2	2.31
	HI Magnetic Conc	10.6	7.05	3.18	19.2	16.8	30.7
Sample 3	Gravity Conc +75 μm	0.29	42.5	0.62	2.73	1.57	3.24
	Gravity Conc -75 μm	0.34	41.4	0.36	2.12	1.79	2.19
	LI Magnetic Fraction	65.2	11.2	0.07	26.5	92.2	84.09
	HI Magnetic Conc	8.4	1.96	0.02	34.7	2.1	3.0
Sample 4	Gravity Conc +75 μm	3.41	41.2	0.070	4.28	11.4	3.78
	Gravity Conc -75 μm	2.17	42.7	0.11	2.17	7.55	3.79
	LI Magnetic Fraction	49.9	16.2	0.074	24.2	65.7	58.4
	HI Magnetic Conc	14.0	7.20	0.046	33.7	8.21	10.2
Sample 5	Gravity Conc +75 μm	10.2	44.8	0.051	3.01	22.4	2.90
	Gravity Conc -75 μm	11.2	46.8	0.16	1.63	25.5	9.93
	LI Magnetic Fraction	9.90	14.9	0.79	22.4	7.20	43.6
	HI Magnetic Conc	13.5	20.5	0.14	23.3	13.5	10.5
Sample 6	Gravity Conc +75 μm	45.7	44.3	0.032	3.64	57.2	64.3
	Gravity Conc -75 μm	14.6	47.3	0.022	1.83	19.5	14.11
	LI Magnetic Fraction	0.50	23.0	0.14	17.8	0.32	3.06
	HI Magnetic Conc	7.71	40.8	0.015	6.57	8.87	4.91
Sample 7	Gravity Conc +75 μm	45.2	49.0	0.000	2.77	51.6	0.0
	Gravity Conc -75μm	3.50	50.3	0.095	0.84	4.10	16.8
	LI Magnetic Fraction	0.69	32.5	0.085	11.4	0.53	2.98
	HI Magnetic Conc	28.9	47.6	0.025	3.40	32.0	36.4
Sample 8	Gravity Conc +75 μm	44.8	47.3	0.010	2.49	52.9	19.4
	Gravity Conc -75 μm	13.2	51.2	0.032	0.80	16.9	18.1
	LI Magnetic Fraction	0.89	28.3	0.073	15.3	0.63	2.83
	HI Magnetic Conc	20.0	46.4	0.026	3.24	23.2	22.9
Sample 9	Gravity Conc +75 μm	24.9	46.3	0.010	3.17	33.2	3.68
	Gravity Conc -75 μm	7.80	47.5	0.11	1.81	10.7	12.5
	LI Magnetic Fraction	0.96	28.2	0.48	15.2	0.78	6.82
	HI Magnetic Conc	12.4	42.0	0.12	5.78	15.0	21.3

The results from these tests suggest the following:

	·	Samples with Cr2O3 values of 20% and over (samples 5 to 9) upgraded to potentially marketable chromite concentrates with reasonable recoveries. The two samples grading between 8.0% and 12.3% Cr2O3 upgraded to over 40% Cr2O3 but with low recoveries.

	·	There tends to be a positive recovery/feed grade relationship for samples 5 to 9. Also, the Cr:Fe ratios of the respective feed and concentrates were similar suggesting that the ratio cannot be improved with upgrading.

	·	It is noted that for the low grade samples (samples 2, 3 and 4) the LIMS recoveries were relatively high while for the higher grade samples (samples 5 to 9) the recoveries were low. This suggests magnetite locking, magnetite surface coatings or magnetic chromite grains due to high Fe content.

	·	Good chromite recoveries (>85%) were maintained for samples 6 to 9 while keeping the SiO2 content in the concentrate below 5%. The SiO2 content of sample 5 rose above 5% at just over 70% Cr2O3 recovery. The SiO2 content of the low grade sample (2 to 4) concentrates was consistently high.

Pre-Concentration Tests

Pre-concentration at a relative coarse size, which is common in many commercial chromite beneficiation facilities, was undertaken to see if heavy media separation (HMS) or coarse particle magnetic separation would be feasible. Minus ½ inch portions of samples 6 and 9 were used. Heavy liquid separation (HLS) tests at ¼ inch, 0.85 mm and 0.3 mm resulted in very little upgrading which suggests a smaller than 0.3 mm liberation size for the chromite samples. The coarse magnetic separation results also showed negligible upgrading.

Sulphide Flotation

One sulphide flotation test was performed to determine if a sulphide concentrate with platinum group metals (PGM) minerals can be extracted from the chromite ore. A composite of equal fractions of samples 5, 6 and 9 was used in a 10-kg flotation test. Table 16.10 summarizes the flotation test results.

Table 16.10

Flotation Test Results

Element	Head Grade	Rougher Recovery	Cleaner Grade	Cleaner Recovery
Sulphur:	0.11 %	71 %	6.4 %	47 %
Palladium	0.32 g/t	65 %	14 g/t	36 %
Platinum	0.22 g/t	46 %	3 g/t	11 %
Gold	0.05 g/t	43 %	1 g/t	19 %

The flotation test was not optimized and improved results would be expected with a more detailed testwork program.

16.4 RECOMMENDATIONS

Most of the various chemical correlations discussed in the report are interesting but not unexpected. These data would benefit from mineralogical or geo-met investigations. QEMSCAM was included as an option by SGS but initially declined due to budget constraints. This, or similar technology, should be included in the next phase of work undertaken on samples that will be more representative of the potential total mineral resource.

The testwork conducted so far was undertaken using either massive or disseminated material. The coarse beneficiation tests were conducted on massive material. No samples crossed the contact between the 2 types, therefore magnetic and gravity tests to upgrade material were, in effect, inconclusive. It was suggested that future tests should include samples of massive chromite and low grade contact material to ascertain coarse beneficiation waste rejection.

A more detailed metallurgical and geo-metallurgical program of work is recommended using samples representing the mineral resource in order to establish an optimum beneficiation flowsheet.

17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

Prior to conducting the resource estimate, the integrity of the entire database was validated as per the methodology described in Section 14 of this report.

17.1 DATABASE DESCRIPTION

The mineral resources for the Big Daddy chromite deposit have been estimated from surface diamond drill holes only. The following is a concise description of the database composition and how the master database used in the resource estimate was derived.

17.1.1 Drill Holes and Assays

The Big Daddy deposit has been tested by 48 drill holes of NQ size on a grid of 100 m between lines taking 2 to 4 holes per line at between 50 m and 100 m apart. The layout is depicted in Figure 11.1. The drill holes cover a strike length of 1 km down to a maximum vertical depth of about 365 m. The assay database consists of 2,974 samples of which the principal analyses were for Cr2O3, Al2O3, Fe2O3, Cr, Fe, SiO2, and PGEs.

17.1.2 Lithology and Mineralization

All drill holes have the major rock types identified and documented in a “from – to” interval format. The major rock types that have been coded include granodiorite, peridotite, harzburgite/dunite, pyroxenite, gabbro, banded ironstone, mafic volcanic rock, intermediate volcanic rock, felsic volcanic rock, mafic/felsic dykes, dolomite and limestone. The overburden averages about 10 m. The mineralization has also been recorded for each interval as being either massive, semi-massive, intermittent beds, heavily disseminated or disseminated.

17.1.3 Survey

The survey information recorded in the files includes collar co-ordinates, dip, azimuth and down-hole survey data. Collars were laid out relative to a surveyed grid (±0.1 m) and verified by GPS (±0.4 m). Down-hole deviations were measured using Flexit, Deviflex or north-seeking gyro (12 collars).

The Big Daddy project area is monotonously flat and therefore a digital terrain model (DTM) is not critical to the estimation of resources.

17.1.4 Specific Gravity (2,216 determinations)

Specific gravity determinations were carried out broadly following ASTM standard D5779 – 08 (Standard Test Method for Field Determination of Apparent Specific Gravity of Rock and Manmade Materials for Erosion Control) using an apparatus suggested by Dr. James Franklin, a director of Spider Resources.

Specific gravities were determined after the core was logged and marked for sampling but prior to the splitting/cutting of the core samples. Core was broken to about 35 cm or shorter pieces, the pieces were sequentially numbered to facilitate replacement in the core box, then weighed first in air and then in water. Shattered and excessively broken core was not included due to the difficulty in correctly returning it to the core box.

Micon witnessed these SG determinations during its site visit on October 22, 2009 and is satisfied that the dataset generated is representative of the mineralization encountered at the Big Daddy deposit. Based on 2,216 determinations, the SG data have been evaluated by Cr2O3 content and are summarized in Table 17.1

Table 17.1

Average Specific Gravity Determinations by Cr2O3 Content

%Cr2O3 Range	Density
0 – 15	2.8
15 – 20	3.0
20 – 25	3.2
25 – 30	3.3
30 – 35	3.4
>35	4.0

17.1.5 Surpac Master Database

The resource estimate was completed using Surpac Version 6.1.3 Software. The Surpac Master Database was created by importing the data described in Sections 17.1.1 to 17.1.4 from Excel spreadsheet files provided by Spider.

17.2 ESTIMATION DETAILS

17.2.1 Overview of Estimation Methodology

The Big Daddy resource estimate has been conducted using a systematic and logical approach involving geological modelling, conventional statistics, geostatistics, creation of interpolation parameters, block modelling, classification based on both geological and mineralization continuity and finally, block model validation.

17.2.2 Geological Modelling/Interpretation

Based on a detailed analysis of the drill hole logs in conjunction with the assays, the major geological domains as encountered down-hole are dunite, peridotite, massive chromite, pyroxenite and gabbro (Figure 17.1). The sequence of appearance of these domains reflects a fractionation trend in the down-hole direction (northwest to southeast) thus confirming the conclusion that the mafic-ultramafic complex (sill) has been rotated.

The bulk of the chromite mineralization is confined to the massive chromite domain. However, the peridotite unit does contain sparsely disseminated chromite grains in concentrations varying between 0 and 10% Cr2O3. Locally, the chromite mineralization may also occur as either heavily disseminated or semi-massive or intermittent beds within the peridotite. Sectional interpretation of the drilled profiles shows that the massive chromite domain forms a distinct layer with observable continuity laterally and down dip. The deepest drill hole intercept is at a vertical depth of about 365 m below surface, with a true thickness of about 13 m; this thickness suggests that at this depth, the massive chromite layer is far from tapering off or pinching.

A surface trace of the massive chromite domain (based on plots from sectional projections) shows that the Big Daddy deposit comprises two segments which the authors have designated BD 1 and BD 2. These are plotted on a gravity map (Figure 17.2) and show a strong correlation between the massive chromite and the gravity anomaly. The subsidiary smaller massive bodies in the footwall are in this report referred to as BD 1 sub and BD 2 sub for BD 1 and BD 2, respectively. A longitudinal section of the two segments is presented in Figure 17.9 which also portrays the distribution of resources. Table 17.2 summarizes the major characteristics of the segments.

Figure 17.1

Schematic Lithologic Column for McFaulds Lake Sill, Big Daddy Segment

(Main Geological Domains)

The contact/boundary of the massive chromite (labelled as chromitite in Figure 17.1) with both the peridotite and pyroxenite is in the majority of instances very sharp. However, in rare instances the contact with peridotite is gradational from disseminated or intermittent beds or semi-massive chromite. No chromite content high enough to be considered

economically significant (>15% Cr2O3) has been observed beyond the contact between massive chromite and pyroxenite; therefore the latter boundary is considered critical for geological continuity and has been used in linking massive chromite zones from section to section demonstrating continuity for the entire 450 m to 500 m of each segment.

Figure 17.2

Gravity Map Bandpass Filter Gravity (Upper Wavelength is 833 m) with the Massive Chrome Domain

Projected to Surface from Sections

Note: The massive chromite is shown as linear black zones. White dots and numbers denote drill hole collars.

Table 17.2

Summary of the Major Characteristics of the Big Daddy Deposit

Segment	Approximate Strike Length (m)	Bearing (Degrees)	Dip (Degrees)	Geometry & Mineralizatiuon	Avg. True Thickness (m)	Remarks
BD 1	500	Varies between 50 and 60	Varies between -85 East and -90	Tabular; Massive	17	Compact; open down dip; limited potential along strike
BD 2	450	050	Varies between -70 and -80 East	Tabular; Massive	12	Compact; open down dip; limited potential along strike.

(Note: In both cases the footwall subsidiaries are excluded)

17.2.3 Statistical Interpretation of Grade Domains

Statistical analysis of the raw data comprising 2,974 samples (2,359 by XRF + 615 by INAA) shows a bimodal distribution (Figure 17.3) representing two extremes, i.e. low grade background mineralization disseminated in peridotite and high grade mineralization in massive chromite. The distribution clearly demonstrates that the mineralization is not fragmented or spread out, but compact. This is consistent with the geological model implying that the high grade mineralization envelope corresponds to the massive chromite geological domain. Using the same graph (Figure 17.3), the top-cut assay for Cr2O3 has been set at 45.3% which correspond to the 99.5 percentile. Table 17.3 summarizes the global statistics.

In order to analyze a broader zone of mineralization, a probability plot of the raw data was constructed and a 15% cut-off was selected based on the break in the probability plot (Figure 17.4). The statistics within this zone shows a very strong negative skewness thereby confirming the compactness and high grade nature of the Big Daddy deposit. This is demonstrated in Section 17.2.4.

Figure 17.3

Histogram of the Raw Assay Data for Cr2O3 (%)

Table 17.3

Global Statistics of the Cr2O3 Raw Data

Variable	Cr2O3 %
Lower cut	0.001

Number of samples	2,974
Minimum value	0.005
Maximum value	47.7

	Ungrouped Data
Mean	18.247806
Median	9.435001
Geometric Mean	7.969418
Variance	285.284539
Standard Deviation	16.890368
Coefficient of variation	0.925611

Skewness	0.405344
Kurtosis	1.412646

Natural Log Mean	2.075611
Log Variance	2.697682

10.0 Percentile	0.82
20.0 Percentile	1.8805
25.0 Percentile	2.49
30.0 Percentile	3.69
40.0 Percentile	6.1045
50.0 Percentile (median)	9.435001
60.0 Percentile	20.475
70.0 Percentile	35.275
80.0 Percentile	39.575
90.0 Percentile	42.245
95.0 Percentile	43.27
96.0 Percentile	43.535
97.0 Percentile	43.9
98.0 Percentile	44.345
99.0 Percentile	44.905
99.5 Percentile	45.29
100.0 Percentile	47.7

Sichel-t	30.673167

Figure 17.4

Probability Plot of the Raw Cr2O3 Data

17.2.4 Composite Data and Grade Domains Statistics

Inspections of drill hole sample intervals augmented by a statistical analysis show that the majority of the sample intervals are 1.5 m. Thus 1.5 m was selected as the standard length (support) and compositing was done to normalize the database to this length.

The statistical distributions of the massive chromite (mineralization domain 1) and the 15% cut-off envelope (mineralization domain 2) are presented in Figures 17.5 and 17.6. The similarity displayed by these distributions is further evidence of a compact distribution of the mineralization. A summary table comparing the statistics of the two grade domains is shown in Table 17.4.

Figure 17.5

Histogram of the Massive Chromite Domain

(Skewness: -1.90)

Figure 17.6

Histogram of Composites at 15% Cut-off with Internal Waste

(Skewness: -1.57)

Table 17.4

Composites Summary Statistics of the Massive Chromite Domain and the 15%Cr2O3 Cut-off Domain

Domain	No. of Samples	Min. Value	Max. Value	Mean	Median	Var.	Std	Coef. Var	Remarks
Massive Cr Zone	927	11.94	47.7	39.39	40.61	21.42	4.63	0.12	Includes internal waste in exceptional cases
15% Cut-off Zone	1,149	2.48	47.7	36.50	39.323	66.78	8.17	0.22	Includes internal waste within envelope (maximum 4.5 m)

17.2.5 Cut-off Grade and Economic Parameters

Demand for chromite is mainly for a metallurgical grade product which is around 40% Cr2O3 with a Cr:Fe ratio of generally at least 2. Metallurgical grades of this nature currently sell for US$180.00 to US$240.00 per tonne. Currently, the Bushveld complex (South Africa) and the Great Dyke (Zimbabwe) rank high amongst the world producers with many of their operations being underground mines.

The Kemi operations in Finland are mainly open pit with an end of 2009 reserve base of 37 Mt at 26% Cr2O3 (Outokumpu, 2009 Annual Report) and a Cr:Fe ratio of about 1.8. However, a portion of the Kemi production is upgraded by means of beneficiation. Thus in the Micon’s opinion, two scenarios must be evaluated for the Big Daddy deposit:

	·	Scenario 1: Focuses on high grade massive material that would produce a lumpy product comparable to South African products with little or no beneficiation.

	·	Scenario 2: Defines a broad zone of mineralization to match the Kemi situation exploitable by open pit but requiring beneficiation to upgrade.

Hence, resources have been estimated for the massive zone only, and also for the broad zone constrained by a 15% Cr2O3 cut-off but including internal waste up to a maximum of 4.5 m. The 15% cut-off is based on the break in the probability plot (Figure 17.4).

17.2.6 Geostatistics

Fundamental geostatistical principles dictate that variography be conducted on data comprising a single population (i.e. samples from geologically homogeneous areas) and on samples representing the deposit (not barren samples). Thus only the massive chromite domain was considered suitable for spatial analysis. The variographic/spatial analysis was conducted to achieve the following:

1.	To define the continuity of the mineralization in order to establish (a) the maximum range or distance over which samples and drill hole intercepts may be correlated, and (b) the adequacy of the drilling grid for a resource estimate.

2.	To define the optimum parameters for the search ellipse to be used in the interpolation of block grades.

The geometry of the Big Daddy deposit is tabular (stratiform) with the major/principal direction along strike, the semi-major direction down dip and the minor axis across width. Hence, for each segment of the deposit three sets of variograms were computed to cover the three geometrical directions. The experimental variograms and their fitted models are presented in Appendix 3. The down-hole variograms are, as expected, quite stable due to the high density of sample information. The variograms for the major and semi-major axes are generally unstable due to low densities of sample information beyond the 275 m lag. Nonetheless, the variograms give a reasonable reflection of the highly continuous nature of the Big Daddy mineralization. The variogram models were fitted giving weight to the number of pairs in each lag in proportion to the drilling grid and using the variance to establish the sill. A summary of the spatial analysis is presented in Table 17.5.

Table 17.5

Summary Results of the Spatial/Variographic Analysis of the Big Daddy Deposits

Segment	Axis	Direction	Nugget	Structure 1	Range	Bearing	Dip
BD 1	Major	Along strike	0	11	250	60	-90
	Semi-major	Down dip	0	11	200
	Minor	Down hole	0	21	40
BD 2	Major	Along Strike	10	14	225	50	-75
	Semi-major	Down dip	10	14	225
	Minor	Down hole	0	21	40

17.2.7 Interpretation and Application of Spatial Analysis Results

The ranges of influence in the major and semi-major directions are in a broad sense about the same, reflecting the isotropic nature of the massive and compact Big Daddy deposit. The apparent shorter range in the down-hole direction (minor axis) is due only to the restriction imposed by the geometry, i.e. the restricted width of 30 m to 60 m of the deposit.

Taking the lower limit of the major axis reflected in BD 2, the range of influence and, therefore, the maximum distance over which drill intercepts and samples can be correlated is 225 m, indicating highly continuous mineralization. Thus, the drilling grid over the Big Daddy deposit as it stands at approximately 100 m x 50 m, is considered adequate for resource definition to the Indicated category. Similar stratiform chromite deposits in Southern Africa display even higher levels of continuity and ranges of influence.

Based on the ranges of influence, the maximum dimensions of the radii of the search ellipsoid for grade interpolation of the Big Daddy should not exceed 225 m x 225 m x 40 m for an Indicated resource.

The variogram range of influence in the major direction is often used in the categorization of resources. As a general rule, mineral resources are classified as follows:

	·	Measured Resource when the drill hole spacing is less than the variogram range of influence at 66% or less of the sill. This translates to approximately 110 m for the massive chromite domain.

	·	Indicated Resource when the drill hole spacing is less than the variogram range of influence at between 66% and 100% of the sill. (100% corresponds to the maximum range of influence beyond which there is no spatial correlation between samples). This translates to 225 m to 250 m for the massive chromite domain.

	·	Inferred resource when drill hole spacing is beyond the range of influence.

(Reference: PDAC Short course, 2009. “From the Core Barrel to a Resource Estimate.”)

17.2.8 Block Size, Interpolation Search Parameters and Technique

In an ideal situation the longest axis of a block should equal the drill spacing but in practice it is varied between half and a quarter of the spacing. On this basis the longer axis of the block was selected as 25 m. The other dimensions of 10 m and 5 m were based on ideal minimum height and width, respectively, in a selective open pit or mechanized bulk mining situation.

In deriving the search radii for the major and semi-major axes, Micon adopted a prudent approach and halved the maximum range of influence as determined by the variography to fit the current spacing between lines of 100 m. For the minor axis, Micon adopted 5 m which is the width of the envisaged mining block.

The inverse-distance-cubed (ID3) interpolation method was selected as the most ideal to bring out grade patterns inherent in the deposit at a micro-scale due to waste inclusions, particularly for the 15% cut-off domain. The search parameters are summarized in Table 17.6.

Table 17.6

Summary of Search Parameters

Attribute	Pass 1	Pass 2	Pass 3
Major axis search radius (m)	100	200	400
Semi-major axis search radius (m)	100	200	400
Minor axis search radius (m)	5	10	20
Maximum # of samples/drill hole	3	3	3
Minimum # of samples/interpolation	5	3	3
Maximum samples/interpolation	10	20	30
Interpolation method	ID3	ID3	ID3

For the three passes, the maximum number of samples per drill hole is designed to manage and control the number of drill holes in the interpolation.

For Pass 1, the minimum and maximum number of samples for each interpolation is designed to ensure that the nearest sample(s) is/are accorded the highest weighting and that a maximum of the three closest holes are used in the interpolation.

For Pass 2, the minimum number of samples for interpolation is designed to ensure a minimum of two drill holes in the interpolation while the allowable maximum samples per interpolation are increased to twenty to go beyond the limits of Pass 1.

For Pass 3, the minimum number of samples for interpolation allows the interpolation to fill all the space in the solid. The maximum number of samples per interpolation is increased to 30 to allow the bigger ellipse to find at least a second hole for interpolation.

17.2.9 Block Modelling Description

Domain model solids were created to encompass the limits of the components of the deposit as defined by the geological interpretation. For scenario 1, only the massive chromite intercepts were considered with no allowance for internal dilution, except in <5% of the cases where linking sections dictated otherwise. For scenario 2, the 15% Cr2O3 cut-off envelope was used allowing for a maximum of 4.5 m of internal waste. (Note: The 4.5 m allowable internal waste equates to three samples and is just under the envisaged block width of 5 m).

An inclined, rotated, partial-percentage block model (i.e. the percentage of any block that is contained within the domain model is used to weight the volume and tonnage reports), with the long axis of the blocks oriented along an azimuth varying between 065 degrees and 050 degrees (parallel to the average domain orientation) and dipping at between -70 degrees and - 90 degrees.

Cr2O3 grades and Cr/Fe ratios were interpolated into the individual blocks of the mineralized domains using ID3. Ordinary kriging was used to run a parallel estimate to validate the ID3 results.

17.3 CLASSIFICATION CRITERIA AND BLOCK MODELLING RESULTS

17.3.1 Classification Criteria

The mineral resources in this report were estimated in accordance with the definitions contained in the CIM Definition Standards on Mineral Resources and Mineral Reserves that were prepared by the CIM Standing Committee on Reserves Definitions and adopted by the CIM Council on December 11, 2005.

The mineralized material was classified into either the Indicated or Inferred mineral resource category on the basis of a combination of the following factors: (a) confidence in the geological and mineralization continuity, (b) position of blocks in relation to the range of

influence as defined by the variographic analysis and (c) and the search ellipse ranges presented in Table 17.4.

17.3.2 Responsibility For Estimation

The Micon staff with responsibility for this resource estimate are Alan J. San Martin, and Charley Murahwi. All are Qualified Persons as defined in NI 43-101, and are independent of the SKF parties.

17.3.3 Statement of Results

Following the concepts and processes described above, the mineral resources for the Big Daddy deposit were estimated and include all blocks that are located within the domain models of the two scenarios. The results of the block model are summarized in Tables 17.7 and 17.8, and are exclusive of the overburden tonnages. The respective block models are presented in Figures 17.7 and 17.8.

Table 17.7

Summary of the Big Daddy Massive Chromite Resources

Deposit/Code	Category	Cr2O3% Interval	Tonnes x 106	Avg. Cr2O3%	Cr/Fe Ratio
BD 1 (100)	Indicated	>35.0	12.934	40.74	2.0
		30.0 – 35.0	0.435	33.63	1.8
		25.0 – 30.0	0.017	28.87	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			13.4	40.49	2.0

BD 2	Indicated	>35.0	9.234	41.44	2.0
		30.0 – 35.0	0.520	32.83	1.8
		25.0 – 30.0	0.090	29.36	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			9.8	40.88	2.0

Grand Total	Indicated		23.2	40.66	2.0


BD 1 (100)	Inferred	>35.0	6.216	39.34	2.0
		30.0 – 35.0	1.014	33.25	1.8
		25.0 – 30.0	0.005	27.97	1.7
		20.0 – 25.0	0	0	0
		15.0 – 20.0	0	0	0
Sub-total			7.2	38.48	2.0

BD 2	Inferred	>35.0	8.382	40.24	2.0
		30.0 – 35.0	0.609	33.32	1.8
		25.0 – 30.0	0.047	28.35	1.7
		20.0 – 25.0	0.021	22.87	1.5
		15.0 – 20.0	0.042	16.76	1.1
		.01 – 15.0	0	0	0

Sub-total			9.1	39.57	2.0

Grand Total	Inferred		16.3	39.09	2.0

Note: The tonnages have been rounded to 3 decimals for grade intervals and to 1 decimal for sub-totals and grand totals.

Table 17.8

Summary of the Big Daddy Chromite Deposit Mineral Resource @ 15% Cr2O3 Cut-off

Deposit/Code	Category	Cr2O3% Interval	Tonnes	Avg. Cr2O3%	Cr/Fe Ratio
BD 1 (100)	Indicated	>35.0	13.535	40.22	2.0
		30.0 – 35.0	1.333	32.98	1.8
		25.0 – 30.0	0.447	27.77	1.7
		20.0 – 25.0	0.152	23.34	1.5
		15.0 – 20.0	0.019	17.81	1.1
		0.01 – 15.0	0.001	12.09	0.7
Sub-total			15.5	39.05	2.0

BD 2	Indicated	>35.0	9.622	41.11	2.0
		30.0 – 35.0	1.031	32.97	1.8
		25.0 – 30.0	0.190	28.04	1.7
		20.0 – 25.0	0.007	22.56	1.4
		15.0 – 20.0	0.009	18.46	1.2
		0.01 – 15.0	0.087	7.74	0.6
Sub-total			10.9	39.82	1.9

Grand Total	Indicated		26.4	39.37	2.0


BD 1 (100)	Inferred	>35.0	7.097	39.14	2.0
		30.0 – 35.0	1.877	32.94	1.8
		25.0 – 30.0	0.543	27.93	1.7
		20.0 – 25.0	0.349	22.58	1.4
		15.0 – 20.0	0.174	18.33	1.1
		0.01 – 15.0	0.016	9.17	0.6
Sub-total			10.1	36.40	1.9

BD 2	Inferred	>35.0	8.993	39.80	2.0
		30.0 – 35.0	0.986	32.89	1.8
		25.0 – 30.0	0.241	28.06	1.7
		20.0 – 25.0	0.123	23.11	1.5
		15.0 – 20.0	0.059	16.90	1.0
		.01 – 15.0	0.014	11.96	0.9

Sub-total			10.4	38.51	2.0

Grand Total			20.5	37.47	1.9

(Includes internal waste within the 15% Cr2O3 envelope up to a maximum of 4.5m).

Note: The tonnages have been rounded to 3 decimals for grade intervals and to1 decimal for sub-totals and grand totals.

Figure 17.7

Block Model of the Massive Domain of the Big Daddy Chromite Deposit

Figure 17.8

Block Model of the Big Daddy Chromite Zone Constrained at 15% Cr2O3 Cut-off

17.3.4 Comments

The block model grades for the massive chromite domain as displayed in Figure 17.7 are fully supported by the distribution of drill hole intercept grades seen in Figure 17.9. The distribution of the Indicated and Inferred Resources within the block model is presented in Figures 17.10 and 17.11 for the massive and 15% cut-off domains, respectively.

Indicated Mineral Resource

The CIM Definition Standards for Mineral Resources and Mineral Reserves of December, 2005 state that:

Mineralization may be classified as an Indicated Mineral Resource by the Qualified Person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. The Qualified Person must recognize the importance of the Indicated Mineral Resource category to the advancement of the feasibility of the project. An Indicated Mineral Resource estimate is of sufficient quality to support a Preliminary Feasibility Study which can serve as the basis for major development decisions.

On the evidence of the geological model/interpretation, statistical and spatial analysis, the Big Daddy deposit demonstrates a high level of continuity in the mineralization both in the lateral and vertical sense. The geological continuity is equally demonstrated, although minor displacements of the deposit, if any, may not have been revealed on the 50 x 100 m grid. Nonetheless, the broad zone of continuity along strike (Figure 17.2) and down dip (Figure 17.9) is sufficiently defined to justify the categorization of the drilled part of the deposit as an Indicated resource.

Inferred Mineral Resource

In accordance with the CIM definition of Inferred Resources , the portion of the Big Daddy deposit below the -220 m elevation for BD 1 and -160 m for BD 2, and all satellite bodies the geological continuity of which is questionable, have been categorized as Inferred. The bulk of the Inferred category of the major components of the deposit remains to be drill tested. Nonetheless, the lower limit of the inferred resource (at 600 m below surface) is considered appropriate. This interpretation is based on:

	·	The large thicknesses of the massive chromite encountered in the line of the deepest holes suggesting that, at between 350 m and 400 m depth, the deposit is not narrowing at depth.

	·	A Magnetic 3-D inversion which suggests that the ultramafic rocks hosting the chromite mineralization extend to a depth of +/- 1,700 m.

	·	Experience with similar type deposits: The sill hosting the chromite mineralization is known to extend for a lateral distance of over 12 km from Blackbird in the southwest

to beyond Black Thor in the northeast. Thus, a depth extension of 600 m is conceivable and considered conservative by analogy with similar intrusions like the Stillwater, Bushveld and Great Dyke Complexes. The relatively thin (<1 m) chromite layers of the Great Dyke are known to be persistent for several km down dip. Recent geophysical investigations at the Kemi deposit indicate persistent mineralization at great depth. The Big Daddy ultramafic-mafic rocks may be part of a much larger intrusion or magmatic complex, extending at least 50 km along strike (Naldrett, 2009).

Due to the uncertainty that may be attached to Inferred Mineral Resources, it cannot be assumed that all or any part of an Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. Inferred Mineral Resources must be excluded from estimates forming the basis of feasibility or other economic studies.

Figure 17.9

Sketch of Longitudinal Section of the Big Daddy Deposit, Looking West

Figure 17.10

Distribution of Resources within the Block Model for the Massive Domain

Figure 17.11

Distribution of Resources within the Block Model constrained at 15% Cut-off

17.3.5 Validation

Validation of the block model and tonnages was conducted manually sing sectional and polygonal techniques and by ordinary kriging. A comparison of results obtained using ordinary kriging and ID3 is presented in Table 17.9.

Table 17.9

Summary of Global Results of ID3 Versus Ordinary Kriging (OK)

Description	OK Blocks	ID3 Blocks
Count	15,645	15,645
Mean (%Cr2O3)	39.26	39.32
Median (%Cr2O3)	40.07	40.25
Variance	10.51	12.49
Standard Deviation	3.24	3.53
Coefficient of variation	0.08	0.09

17.3.6 Qualification of the Mineral Resources

Micon believes that at present there are no known environmental, permitting, legal, title, taxation, socio-economic, marketing or political issues which would adversely affect the mineral resources estimated above. However, mineral resources, which are not mineral reserves, do not have demonstrated economic viability. Micon cannot guarantee that the SKF parties will be successful in obtaining any or all of the requisite consents, permits or approvals, regulatory or otherwise for the project. Other future setbacks may include aboriginal challenges to title or interference with ability to work on the property and lack of efficient infrastructure. There are currently no mineral reserves on the Big Daddy property and there is no assurance that the project will be placed into production.

17.3.7 Potential Upgrading of the Indicated Resource

It is considered likely that, in order to upgrade the Indicated resource to the Measured category, a few strategically positioned drill holes will suffice. These positions are marked on the sketch long section shown in Figure 17.9. Additional holes are unlikely to improve the grade but may assist in revealing minor displacements.

18.0 OTHER RELEVANT DATA AND INFORMATION

18.1 THE MARKET FOR CHROMITE

The results of metallurgical testwork described in Section 16.0 of this report indicate that marketable chromite products may, potentially, be produced from the Big Daddy deposit.

18.2 OVERVIEW

Chromite is the source of the metallic element chromium which is used in a wide range of applications in metallurgy, refractory materials and chemicals. The principal end-uses are in stainless steel and non-ferrous alloys, and stainless steel accounts for approximately 94% of demand for chromite. Metallurgical grade chromite is converted to ferrochromium which is then added to steel and iron melts. The foundry sands sector accounted for approximately 3% of output in 2007, followed by chromium chemicals at 2% of output and refractories at less than 1%.

Chromite is produced in metallurgical, chemical, refractory and foundry grades for which the general specifications are shown in Table 18.1.

Table 18.1

General Specifications for Chromite Grades

	Metallurgical Grade	Chemical Grade	Refractory Grade	Foundry Grade
Cr2O3 (%)	>46	>44	30-40	44
Cr:Fe	>2:1	>1.5	2-2.5:1
SiO2 (%)	<10	<3.5	6	<4

Specific end-use sectors require additional physical and chemical characteristics. In metallurgical applications, phosphorus, sulphur and other minor elements should not exceed certain levels. Foundry sands require silica at less than 1%, sub-angular grains and specific grain sizes. Premium refractory grades are relatively coarse-grained.

The majority of chromite used in metallurgical applications is smelted to ferrochromium before it is added to the steel melt. The principal ferrochromium alloys are high-carbon ferrochromium (HCFeCr) for which the chromite ores should have a Cr:Fe ratio of 2.0-3.6, and charge chrome which is produced from lower grade ores with Cr:Fe ratio of 1.3-2.0. Direct shipping, or lumpy ore, has grain a size over 6 mm and is a premium product since it can be fed directly to the ferroalloy smelter. Fine grained chromite (less than 6 mm) must be pelletized before use.

Refractory chromite is further divided into magnesia-chromite (20-70% Cr2O3), chromite (>30% Cr2O3) and picrochromite (>70% Cr2O3), depending on the specific end use.

18.3 PRODUCTION OF CHROMITE AND FERROCHROMIUM

World production of chromite reached 22.5 Mt gross weight in 2008, having increased steadily since 2000 (International Chromium Development Association, (ICDA), 2008). Preliminary figures published by the United States Geological Survey indicate output of 23 Mt in 2009.

Table 18.2 shows the 10 largest producers in 2008 and world output for the five years from 2004 to 2008. Production in both Russia and Turkey has increased significantly since the early 2000s.

Table 18.2

World Chromite Production

(Thousand t gross weight)

	2004	2005	2006	2007	20081
South Africa	7,310	7,244	6,865	8,720	8,646
Kazakhstan	3,290	3,581	3,366	3,687	3,940
India	2,949	3,255	3,600	3,320	2,895
Turkey	506	859	1,060	1,679	18,901
Russia	320	772	966	777	1,020
Brazil	623	677	604	626	712
Zimbabwe	621	820	713	664	528
Finland	580	571	549	556	500
Pakistan	130	148	199	323	385
Oman	19	18	71	338	355
Others	1,254	1,196	1,248	1,464	1,656
Total	17,602	19,141	19,241	22,154	22,527

1 Industrial Minerals, March, 2009 (reporting ICDA).

Source: ICDA, 2008 Statistical Bulletin.

There has been a general trend towards production of ferrochromium within the vicinity of chromite output, and away from the major stainless steel production centres, although China has emerged as a significant producer of both ferrochromium and stainless steel based primarily on imported feedstocks. China has the largest non-integrated ferrochromium capacity

Production of ferrochromium (high carbon charge grade) between 2004 and 2008 is given in Table 18.3 which shows the rapid increase in output in China.

Table 18.3

World Production of Ferrochromium

(Thousand t gross weight)

	2004	2005	2006	2007	20081
South Africa	2,960	2,506	2,818	3,536	3,260
Kazakhstan	820	908	928	1,070	1,040
China	532	680	858	1,060	1,250
India	527	611	634	820	750

	2004	2005	2006	2007	20081
Russia	147	295	304	345	320
Finland	264	235	243	242	240
Zimbabwe	218	257	214	201	210
Brazil	185	170	141	164	175
Sweden	128	127	136	124	115
Turkey	25	16	56	59	60
Others	60	54	39	18	42
Total	5,866	5,859	6,371	7,639	7,462

1 Industrial Minerals, March, 2009 (reporting ICDA).

Source: ICDA, 2008 Statistical Bulletin.

18.4 END-USE SECTORS

The breakdown for the principal uses of chromite ores and concentrates is given in Table 18.4. The use of chromite in foundry sands has increased steadily since 2000 while, generally, chromium chemicals have accounted for a declining share of output. Use of chromite in refractories was strong in 2006 and 2007 compared with earlier years.

Table 18.4

Principal Uses for Chromite Ores and Concentrates

(Thousand t gross weight)

	2004	2005	2006	2007	2008
Metallurgical	16,254	17,878	17,723	20,756	21,400
Refractory	101	125	189	180	180
Chemical	753	595	672	531	450
Foundry sands	495	542	657	688	500
Total	17,602	19,141	19,241	22,154	22,530

Source: ICDA, 2008, Statistical Bulletin

Refractory chromite is used in products for the linings of iron and steel furnaces, flash and continuous smelters, rotary cement kilns, and glass manufacture.

Chromite is used to manufacture a wide range of chromium chemicals of which chromic acid, sodium dichromate, sodium chromate and sodium chromate tetrahydrate are the most important. The uses of chromium chemicals include metal finishing (corrosion resistance, promotion of adhesion of paint), wood preservative, dyes, oxidizing agents, pigments, leather tanning, oil well drilling and catalysts. However, a number of chromium compounds are hazardous or toxic (particularly hexavalent chromium) and the use of chromite in chromium chemicals has declined significantly with increasing control on usage and on the disposal of chromium-containing wastes.

Chromite foundry sands have good thermal conductivity, resist metal penetration and slag attack, resist thermal shock and have a low coefficient of thermal expansion. They are used in manganese-, carbon- and alloy-steel casting and non-ferrous casting.

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Production of chromium metal is relatively minor at approximately 35,000 t/y. It is valued for its resistance to chemical corrosion.

18.4.1 Stainless Steel

Chromium is the only element which results in steels having stainless properties. Stainless steels contain a minimum of 10.5% chromium (International Stainless Steel Forum, ISSF) and are divided into ferritic, martensitic, austenitic and duplex types. All are corrosion resistant. Ferritic steels contain 13 to 17% chromium and martensitic steels contain around 12% chromium. Austenitic steels contain the highest proportion of chromium, typically 18%. Duplex steels combine austenitic and martensitic structures and contain 18 to 28% chromium, plus nickel and molybdenum and are used in particularly stringent corrosion conditions.

The ISSF reports production of stainless and heat resisting steels, as shown in Table 18.5. World output exceeded 20 Mt in 2002.

Table 18.5

Production of Stainless Steel by Region

(Thousand t ingot/slab equivalent)

Region	2004	2005	2006	2007	20081	20092
Western Europe/Africa	9,422	8,823	9,972	8,669	8,272	6,449
Central and Eastern Europe	318	310	363	364	333	237
Americas	2,933	2,688	2,951	2,604	2,315	1,958
Asia	11,897	12,498	15,074	16,200	15,0112	15,9352
Total	24,570	24,319	28,359	27,836	25,930	24,578

1 Preliminary.

2 From 2008, China’s output reported separately: 6,943,000 t in 2008 and 8,805 t in 2009.

18.5 INDUSTRY STRUCTURE

The proportion of mined chromite production by independent, non-integrated companies has generally decreased over the past decade and the majority of mine capacity is now owned and operated by companies in the ferrochromium, chromium chemicals or chromite refractory sectors.

There remains, however, significant international trade in chromite concentrates, directly between producers and end-users or through trading houses.

18.6 PRICES

There is no terminal market, such as the London Metal Exchange, for chromite and ferrochromium and prices are negotiated between buyers and sellers, either on the spot market or under contract. Representative prices are reported by industry publications. Prices for chromite are quoted monthly by Industrial Minerals journal based on data from industry participants (producers, traders and consumers). It should be noted that such prices are

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indicative of market activity and do not represent actual transactions. Unit values may also be calculated from trade statistics although it should be noted that these represent value at the point of export or import and not at the mine gate. See Table 18.6.

Table 18.6

Representative Prices for Chromite

(US$/t)

	2005	2006	20071	2008	2009	20102
Metallurgical grade
South African3 40% Cr2O3, fob	65-95	100-145	240-290	320-350	115-135	180-240
Turkish 40-402%, 2.5:1			200-300	350	240-260	240-260
Kazakh 40-41% min			200-300	350	220-250	220-250
46% Cr2O3, wet bulk, fob
South African chemical grade	105-125	175-183	270-350	560-570	190-210	240-280
South African foundry grade	170-195	195-220	300-350	510	230-260	280-335
South African refractory grade	100-120	215-235	455	880	370-390	370-395

1 Turkish and Kazakh metallurgical grades quoted starting January, 2007.

2 May, 2010.

3 Friable lumpy grade.

Source: Industrial Minerals, December issues.

Chromite prices in 2009 reflected the sharp slowdown in industrial and economic activity due to the recession. Prices for all South African grades started to fall at the beginning of 2009. By May, 2010, some firming in prices for South African grades was apparent.

18.7 OTHER RELEVANT DATA AND INFORMATION

All other relevant data and information regarding the Big Daddy chromite deposit has been disclosed under the relevant sections of this report.

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19.0 INTERPRETATION AND CONCLUSIONS

19.1 EXPLORATION CONCEPT

19.2 GEOLOGY AND MINERAL RESOURCES

The Big Daddy deposit is tabular, as is typical of stratiform chromite deposits hosted by layered mafic-ultramafic intrusions. The tabular form and the continuity of massive chromite intersections from hole to hole and section to section has facilitated delineation of the deposit using relatively wide hole spacing. Three to four holes were drilled along sections cut at 100 m intervals so that collars were 50 or 100 m apart. The sections extend over a 1,200 m strike length of which ~1,000 m is mineralized. The current drill density is sufficient to estimate an Indicated resource over part of the deposit. The consistency and persistency of the deposit as revealed by variographic analysis implies that only very limited additional drilling should be necessary to upgrade the Indicated resource to the Measured category.

The two segments of the Big Daddy deposit (BD 1 and BD 2) remain open at depth but the lateral extents are unlikely materially to exceed the already established limits. In Micon’s opinion, therefore, infill drilling to enhance the confidence level of the resource is more important than step-out drilling to increase tonnage.

19.3 METALLURGY

The preliminary metallurgical investigations completed to date are inconclusive but the initial work did indicate that marketable products were obtainable. In particular, the core of the Big Daddy deposit consists of massive mineralization which should generate a lumpy product comparable in quality to others currently offered in the marketplace. Further testwork is required.

19.4 MARKET OUTLOOK

Potential new sources of supply will be evaluated in relation to the geographical location of potential markets and product quality.

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19.5 PROJECT OBJECTIVES

Micon is satisfied that the overall project objectives as detailed in the previous Micon technical report (2009), have been met in a highly efficient and cost saving manner. The next major challenge will be to bring the property into production; prior to which additional technical and economic studies will be required.

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20.0 RECOMMENDATIONS

Spider and KWG have established a firm resource base upon which to proceed with prefeasibility studies. However, in order to advance the project to the prefeasibility level, a critical prerequisite is to complete metallurgical investigations to establish the product quality of the massive chromite and the optimum beneficiation process for the disseminated/lower grade mineralization.

Whilst additional resources may be discovered by deeper drilling, Micon believes that the optimal economic depth for mining should be determined before such drilling is undertaken. Thus, in the short to medium term, additional drill programs are not a priority.

In view of the foregoing, Micon makes the following recommendations:

1.	Detailed metallurgical work needs to be completed to enable prefeasibility studies to commence. The investigations should primarily focus on the establishment of product quality/recovery relationships and the marketing potential of the Big Daddy chromite concentrates.

2.	Detailed mineralogical work should be conducted simultaneously with metallurgical investigations so as to elucidate chromite grain liberation characteristics, chromite grain chemistry and gangue mineralogy.

3.	A prefeasibility study should to be conducted at the conclusion of metallurgical /mineralogical investigations, if warranted.

4.	In addition to the above, a basic but detailed survey of the infrastructural requirements should be initiated, taking into account the possible synergies of cooperation with other parties holding prospective mineral resources in the McFaulds Lake area.

If prefeasibility studies are favourable, Micon recommends that infill drill holes as indicated on Figure 17.9 be drilled for the purpose of upgrading the resource from Indicated to Measured. Additional holes to increase the resource from Inferred to Indicated are not marked on Figure 17.9 but can be designed and drilled if warranted. In view of the remoteness and lack of infrastructure of the SKF project area, the overall (global) size of the deposit will impact significantly in any future investment decision making process.

Whilst current exploration/evaluation efforts are on chrome, the potential for other deposit types should not be overlooked, particularly MMS (which might occur in the same peridotite unit hosting the chrome mineralization) and VMS type deposits in the eastern segment of the SKF property area. Freewest’s and Noront’s MMS discoveries in peridotite (see Section 15) lend support for continued follow-up work on EM conductors

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In line with these recommendations, Spider/KWG have proposed the following two-phased budget (Table 20.1)

Table 20.1

Summary of Budget Proposals for the Big Daddy Chromite Project

Phase	Description of Activity/Program	Estimated. Cost($)
1 a	Geometallurgical studies involving mineralogical and microprobe work	50,000
1 b	Metallurgical testing including allowance for drill holes to get metallurgical	500,000
	sample
1 c	Infrastructural study	50,000
1 d	Prefeasibility/scoping study	100,000
	Contingency on phase 1 activities (about 10% of totals 1 a to 1 d)	70,000
	Sub total Phase 1	770,000

2	Diamond drilling	4,000,000
	Contingency on phase 2 activities	400,000
	Sub-total phase 2	4,400,000

1&2	Grand Total	5,170,000

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21.0 REFERENCES

21.1 TECHNICAL REPORTS (SEDAR/IN-HOUSE)

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Armstrong, T., Puritch, E., Yassa, A., Pearson, J. L., Hayden, A., Partsch, A., 2008 10 20. Technical Report and Preliminary Economic Assessment on the Eagle One Deposit, Double Eagle Property, McFaulds Lake Area, James Bay Lowlands, Ontario, NI 43-101 Technical Report by P&E Mining Consultants Inc., Report No. 156.

Aubut, A. 2010 01 10 Mineral Resource Estimation of Black Thor Chromite Deposit, McFauld’s Lake, Ontario, Canada 43-101 compliant report for Freewest Resources Ltd. (Disclosed on Freewest’s website; Circa 2010 01 01).

Burns, J. G. April, 2005. Report of Drilling on the McFaulds Lake Property, Porcupine Mining Division, Ontario, of Freewest Resources Canada Inc. for Freewest Resources Canada Inc. (Internal Report).

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Golder Associates 2010 04 23 Technical Report and Resource Estimate on McFaulds Lake Project, James Bay Lowlands, Ontario, Canada for Noront Resources Ltd; 183 pp and 5 appendices. Available at www.sedar.com).

Gowans, R. and Murahwi, C. 2009 03 31 Ni 43-101 Technical Report on the Big Daddy Chromite Deposit and associated Ni-Cu-Pge James Bay Lowlands, Northern Ontario for Spider Resources Inc., KWG Resources Inc. and Freewest Resources Inc

Gowans R., Spooner, J., San Martin, AJ and Murahwi, C. 2010 01 22 Technical Report on the Mineral Resource Estimate for the Black Bird Chrome Deposits James Bay Lowlands Northern Ontario, Canada 197 pp. (Available at www.sedar.com).

JVX Geophysical Surveys and Consulting, November, 2008. Report on Magnetic/VLF and HLEM Surveys, Freewest Option Property, McFaulds Lake Area, Ontario. Private Report for SKF Option Parties.

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Kjarsgaard, I. 2009 12 Petrography of a Polished Section from the McFaulds property, Northern Ontario; DDH FW-09-33 for Dr. James Franklin. 6 pp

Lahti, H. R., April, 2008. Technical Report on the McFaulds Lake Project, Porcupine Mining Division, James Bay Lowlands, Ontario, Canada, for UC Resources and Spider Resources Inc.

Lahti, H. R., April, 2008. Final Report on Drill Results Spider/KWG/Freewest [SKF] Project McFaulds Camp, Ontario. Claims 3012250, 30122252, 3012253, 3008268, 3008269 and 3008793. BMA 527861. Private Report for option parties.

Lahti, H.R. 2008 08 30 Updated Technical Report on the McFaulds Lake Project, James Bay Lowland, Ontario, Canada 43-101 report for Spider & UC Resources, 96 pp

McBride, D. E., September, 1994. Report on the geological observations and their significance, Spider Lake Project, Attawapiskat River, James Bay Lowlands. Unpublished report for KWG Resources and Spider Resources Inc.

Naldrett, A.J., 2009. Report on visit to Spider-KWG and Freewest properties, September 16- 19, 2009.

Noront 2009 07 29 Noront Resources reports Thunderbird vanadium assay results; Press release.

Noront 2010 03 09 Noront announces resource increase at Eagle's Nest deposit; Press release.

Noront 2009 08 09 MD&A for year ended 30 April 2009

Novak, N., April 12, 2006. Spider Resource Inc. / KWG Resources Inc/ Freewest Resources Inc., Option Agreement, West Property, Grids “H” and “J” on claims 3012250, 3012252, 3012253, 3008268, 3008269 and 3008793 (NTS 43D/16). Private Report for option parties.

Phillips Enterprises, LLC, Metallurgical Testing and Consulting Services, October 2, 2008. Beneficiation Report.

Probe Mines 2009 08 26 Intersects High-Grade Chromite in the New Black Creek Discovery; Press Release.

Probe Mines 2009 11 24 Phase II Drilling Results Yield More High-Grade Chromite for the Black Creek Discovery; Press Release.

Reed, L.E. 2009 09 Notes on the Ground Magnetometer and Gravity Surveying, Grid J, McFaulds Lake Area, Greig Lake, 42D16, Northwest Ontario 11 pp

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Scott Hogg & Associates, 2004. Ground Magnetic and Horizontal Loop Electromagnetic Survey, McFaulds Lake - Northwestern Ontario; Compilation and Interpretation Report.

Scott Hogg & Associates, 2006. Condor Diamond Corp. Compilation and Interpretation Report of a Ground Magnetic Survey in the McFaulds Lake Area, Northern Ontario.

Thomas, Roger D., 2004. Technical Report Spider #1 and #3 Projects, James Bay Joint Venture, James Bay, Ontario. Spider Resources and KWG Resources.

Naldret, A.J. 2009. Report on visit to Spider-KWG and Freewest properties, September 16- 19, 2009.

World Industrial Minerals, September, 2008. “Chromite Testing Analyses Report, Big Daddy Chromite Occurrence”. Prepared for the SKF Option Parties.

PDAC Short Course, 2009. From the Core Barrel to a Resource Estimate, A review of Current Best Practices

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22.0 DATE AND SIGNATURE PAGE

MICON INTERNATIONAL LIMITED

Effective Date: March 30, 2010

Signing Date: June 4, 2010

Richard Gowans, P.Eng.

Micon International Limited

“Richard Gowans” {signed and sealed}

Jane Spooner, M.Sc., P. Geo.

Micon International Limited

“Jane Spooner” {signed and sealed}

Alan J. San Martin, MAusIMM

Micon International Limited

“Alan San Martin” {signed}

Charley Murahwi, M.Sc., P. Geo., Pr.Sc.Nat., MAusIMM

Micon International Limited

“Charley Murahwi” {signed and sealed}

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23.0 CERTIFICATES

115

CERTIFICATE OF QUALIFIED PERSON

RICHARD M. GOWANS, P.Eng.

As a co-author of this report entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada”, dated March 30, 2010, I, Richard M. Gowans P. Eng. do hereby certify that:

1.	I am employed by, and carried out this assignment for
		Micon International Limited
		Suite 900, 390 Bay Street
		Toronto, Ontario
		M5H 2Y2
		tel. (416) 362-5135 fax (416) 362-5763
		e-mail: rgowans@micon-international.com

2.	I hold the following academic qualifications:
		B.Sc. (Hons) Minerals Engineering, The University of Birmingham, U.K. 1980

3.	I am a registered Professional Engineer of Ontario (membership number 90529389); as well, I am a member in good standing of the Canadian Institute of Mining, Metallurgy and Petroleum.

4.	I have worked as an extractive metallurgist in the minerals industry for over 28 years.

5.	I do, by reason of education, experience and professional registration, fulfill the requirements of a Qualified Person as defined in NI 43-101. My work experience includes the management of technical studies and design of numerous metallurgical test-work programs and metallurgical processing plants.

6.	I have not visited the project site.

7.	I am responsible for the preparation of Section 16 of this report entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada , dated March 30, 2010.

8.	I am independent of the SKF option parties involved in the Big Daddy property, as described in Section 1.4 of NI 43-101.

9.	I have had no prior involvement with the mineral property in question, other than that I was a co-author of the March 31, 2009 Technical Report.

10.	I have read NI 43-101 and the portions of this report for which I am responsible have been prepared in compliance with the instrument.

11.	As of the date of this certificate, to the best of my knowledge, information and belief, the sections of this Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make this report not misleading.

Effective Date: March 30, 2010

Signing Date: June 4, 2010

“Richard M. Gowans” {signed and sealed}

Richard M. Gowans, P.Eng.

116

CERTIFICATE OF QUALIFIED PERSON

JANE SPOONER, M.Sc., P.Geo.

1.	I am employed by, and carried out this assignment for
		Micon International Limited
		Suite 900, 390 Bay Street
		Toronto, Ontario
		M5H 2Y2
		tel. (416) 362-5135 fax (416) 362-5763
		e-mail: jspooner@micon-international.com

2.	I hold the following academic qualifications:
		B.Sc. (Hons) Geology, University of Manchester, U.K. 1972
		M.Sc., Environmental Resources, University of Salford, U.K. 1973

3.	I am a member of the Association of Professional Geoscientists of Ontario (membership number 0990); as well, I am a member in good standing of the Canadian Institute of Mining, Metallurgy and Petroleum.

4.	I have worked as a specialist in mineral market analysis for over 30 years.

5.	I do, by reason of education, experience and professional registration, fulfill the requirements of a Qualified Person as defined in NI 43-101. My work experience includes the analysis of markets for base and precious metals, industrial and specialty minerals, coal and uranium.

6.	I have not visited the project site.

7.	I am responsible for the preparation of Section 18 of this report entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada”, dated March 30, 2010.

8.	I am independent of the parties involved in the Big Daddy property, as described in Section 1.4 of NI 43-101.

9.	I have had no prior involvement with the mineral property in question.

10.	I have read NI 43-101 and the portions of this report for which I am responsible have been prepared in compliance with the instrument.

11.	As of the date of this certificate, to the best of my knowledge, information and belief, the sections of this Technical Report for which I am responsible contain all scientific and technical information that is required to be disclosed to make this report not misleading.

Effective Date: March 30, 2010

Signing Date: June 4, 2010

“Jane Spooner” {signed and sealed}

Jane Spooner, M.Sc., P.Geo.

117

CERTIFICATE OF QUALIFIED PERSON

ALAN J. SAN MARTIN

1)	I am employed as a Mineral Resource Modeller by Micon International Limited, Suite 900, 390 Bay Street, Toronto, Ontario M5H 2Y2, tel. (416) 362-5135, fax (416) 362-5763, e-mail asanmartin@miconinternational. com;

2)	I hold a Bachelor Degree in Mining Engineering (equivalent to B.Sc.) from the National University of Piura, Peru, 1999;

3)	I am a registered Engineer with the Colegio de Ingenieros del Peru (CIP) Membership # 79184;

4)	I am a member of the Australasian Institute of Mining and Metallurgy (Membership #301778)

5)	I have worked as a mining engineer in the minerals industry for 10 years;

6)	I am familiar with NI 43-101 and I am a Qualified Person for the purposes of NI 43-101.

7)	I have not visited the Big Daddy property.

8)	I have had no prior involvement with the mineral property in question.

9)	As of the date of this certificate to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this report not misleading;

10)	I am independent of the parties involved in the Big Daddy project as described in Section 1.4 of NI 43-101.

11)	I have read NI 43-101 and the portions of this report for which I am responsible have been prepared in compliance with the instrument.

12)	I am jointly responsible for the preparation of Section 17 of this Technical Report dated March 30, 2010 entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada.”

Effective Date: March 30, 2010

Signing Date: June 4, 2010

“Alan J. San Martin” {Signed}

Ing. Alan J. San Martin, MAusIMM

Micon International Limited

118

CERTIFICATE OF QUALIFIED PERSON

CHARLEY Z. MURAHWI

As a co-author of this report entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada” dated March 30, 2010, I, Charley Z. Murahwi do hereby certify that:

1)	I am employed as a Senior Geologist by, and carried out this assignment for, Micon International Limited, Suite 900, 390 Bay Street, Toronto, Ontario M5H 2Y2, telephone 416 362 5135, fax 416 362 5763, e-mail cmurahwi@micon-international.com.

2)	I hold the following academic qualifications:

	B.Sc. (Geology) University of Rhodesia, Zimbabwe, 1979;

	Diplome d΄Ingénieur Expert en Techniques Minières, Nancy, France, 1987;

	M.Sc. (Economic Geology), Rhodes University, South Africa, 1996.

3)	I am a registered Professional Geoscientist of Ontario (membership number 1618) and am also a member of the Australasian Institute of Mining & Metallurgy (AusIMM) (membership number 300395).

4)	I have worked as a mining and exploration geologist in the minerals industry for over 28 years;

5)	I do, by reason of education, experience and professional registration, fulfill the requirements of a Qualified Person as defined in NI 43-101. My work experience includes 12 years on Cr-Ni-Cu-PGE deposits (on and offmine), and the balance on a wide variety of other mineral commodities including gold, silver, copper, tin, and tantalite.

6)	I visited the Activation Laboratory in Thunder Bay on 10 January, 2009 and the Big Daddy mineral property, between 11 and 13 January, 2009 and on October 22, 2009.

7)	I have had no prior involvement with the mineral property in question, other than that I was a co-author of the March 31, 2009 Technical Report.

8)	As of the date of this certificate to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make this report not misleading;

9)	I am independent of the parties involved in the Big Daddy property as described in Section 1.4 of NI 43-101.

10)	I have read NI 43-101 and the portions of this Technical Report for which I am responsible have been prepared in compliance with this Instrument.

11)	I am responsible for the preparation of all sections except Sections 16 and 18 of this Technical Report dated March 30, 2010 and entitled “Technical Report on the Mineral Resource Estimate for the Big Daddy Chromite Deposit, McFaulds Lake Area, James Bay Lowlands, Northern Ontario, Canada”.

Effective Date: March 30, 2010

Signing Date: June 4, 2010

“Charley Z. Murahwi” {signed and sealed}

Charley Z. Murahwi, M.Sc., P. Geo. Pr.Sci.Nat., MAusIMM

119

APPENDIX 1

Claim Abstracts

120

121

122

123

124

125

APPENDIX 2

Example of QC Report for the Big Daddy Deposit

126

127

128

129

130

131

132

133

134

135

136

137

138

APPENDIX 3

Full Results of Variographic Analysis

139

140

141

142

143

144

145

APPENDIX 4

Level Plans at 50m Intervals Starting from Surface

146

147

148

149

APPENDIX 5

Sections at 50m Intervals

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

Spider Resources Inc.

Management’s Discussion and Analysis

Year Ended

December 31, 2009

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

INTRODUCTION

The following management’s discussion and analysis (“MD&A”) of the financial condition and results of the operations of Spider Resources Inc. (“Spider” or the “Company”) constitutes management’s review of the factors that affected the Company’s financial and operating performance for the year ended December 31, 2009. This MD&A was written to comply with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations. This discussion dated April 7, 2010, should be read in conjunction with the audited annual financial statements of the Company for the year ended December 31, 2009, together with the notes thereto, and the audited annual financial statements for the year ended December 31, 2008, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. The audited annual financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). Information contained herein is presented as at April 7, 2010, unless otherwise indicated.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Spider common shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) if it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

Further information about the Company and its operations is available on Spider’s website at www.spiderresources.com or on SEDAR at www.sedar.com.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

The MD&A of the Company contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statement. Specifically, this MD&A includes forward-looking statements regarding:

	·	the Company’s goal of creating shareholder value by concentrating on the acquisition and development of properties that have the potential to contain valuable mineral deposits;
	·	future plans for property interests held by the Company or that may be acquired;
	·	management’s outlook regarding future trends;
	·	the Company’s ability to fund its operating costs and exploration programs at current operating levels for fiscal 2010;
	·	sensitivity analysis on financial instruments may vary from amounts disclosed;



www.spiderresources.com	Page 2

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	·	prices and price volatility for minerals;
	·	the Company’s future exploration, capital and operating costs, including the costs and potential impact of complying with existing and proposed environmental laws and regulations; and
	·	general business and economic conditions.

Inherent in forward-looking statements are risks, uncertainties and other factors beyond the Company’s ability to predict or control. These risks, uncertainties and other factors include, but are not limited to, mineral price volatility, changes in debt and equity markets, the uncertainties involved in interpreting geological data, increases in costs, environmental compliance and changes in environmental legislation and regulation, interest rate and exchange rate fluctuations, general economic conditions and other risks involved in the gold exploration and development industry, as well as those risk factors listed in the “Risk Factors” section below. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such statements are based on a number of assumptions that may prove to be incorrect, including, but not limited to, assumptions about the following:

	·	the availability of financing for the Company’s exploration and development activities;
	·	operating and exploration and development costs;
	·	the Company’s ability to attract and retain skilled staff;
	·	timing of the receipt of regulatory and governmental approvals for exploration projects and other operations;
	·	market competition;
	·	the Company’s ongoing relations with its consultants and employees; and
	·	general business and economic conditions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking statements. This cautionary statement herein qualifies all forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statement, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.

The Company is a reporting issuer under applicable securities legislation in the provinces of Alberta, British Columbia, Ontario and Quebec and its outstanding shares are listed on the TSX Venture Exchange under the symbol “SPQ”.

DESCRIPTION OF BUSINESS

The Company is an exploration enterprise and carries on business in one segment, being the exploration for valuable minerals, exclusively in Canada. To date, the Company has not earned significant revenues from its exploration rights and is considered to be in the development stage. As such, the Company has



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

applied Accounting Guideline 11, "Enterprises in the Development Stage", from January 1, 1995, which is the date of inception of the development stage.

The recoverability of amounts shown as mining interests is dependent upon a number of factors including environmental risk, legal and political risk, the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying properties, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposition thereof.

Spider's near term goal is to deliver superior returns to shareholders by concentrating on the acquisition of exploration properties that have the potential to contain valuable mineral deposits. The Company plans to focus on certain of its properties, as set out below under “Mineral Exploration Properties”.

OVERALL PERFORMANCE

Management is focusing on and developing the “Big Daddy” chromite deposit. The Company's long-term goal is to continue to explore the economic potential of the deposit and consider developing the deposit through to commercial production or to sell its interest at a favourable price once an independent valuation has been determined to ensure fairness in the event of a sale of this strategic asset.

On September 14, 2009, Spider announced that it had amended and restated the December 2005 option agreement with respect to Freewest Resources Canada Inc.’s McFaulds property located in Ontario. Each of Spider and KWG Resources Inc. had to that date earned a 25% interest in the Big Daddy chrome property, which is composed of four 16-unit claims, one 12-unit claim and two additional one-unit claims (1,248 hectare property), pursuant to an option agreement first entered into with Freewest in December 2005.

During the negotiations, the delivery of a bankable feasibility study by the optionees was removed as a requirement of the earn-in and consequently the optionees (Spider and KWG) can only vest with 30% each once each fulfills the conditions of the new option agreement.

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 completed; (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, which must notify Freewest of any such decision on or before March 31, 2011.

The amended option agreement further provides that Spider and KWG will alternate as operator of the McFaulds joint venture project for one-year terms, until March 31, 2012, with Spider acting as initial



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

operator until March 31, 2010. The parties will decide on the operator for the period after March 31, 2012, by way of majority vote. Pursuant to the option agreement, the operator will receive a 5% operator cost based on the total invoiced expenditures. As of December 31, 2009, Spider earned a total of $250,943 in operator cost.

The amended option agreement also provides that upon the earlier of the termination of the option period, or Spider and KWG acquiring an aggregate 60% interest in the McFaulds joint venture property, a joint venture agreement among the three parties will automatically come into effect. The joint venture agreement is a schedule to the amended option agreement.

KWG and Spider have undertaken an exploration program on the Big Daddy chrome property under which an aggregate of more than $5 million has been spent by March 31, 2010. Such exploration expenditures were fully incurred in fiscal 2009. Subsequent to year end, Spider notified Freewest that the required expenditures had been completed by both KWG and Spider.

While general economic conditions continue to improve and stability appears to be returning to financial and commodity markets, significant uncertainty concerning the short and medium term global economic outlook persists. Management, in conjunction with the Board of Directors, will continue to monitor these developments and their effect on Spider’s business.

At the date of this MD&A, the agreement with Renforth Resources Inc. is being reviewed.

At December 31, 2009, the Company had assets of $25,385,224 and a net equity position of $22,765,854. This compares with assets of $22,417,191 and a net equity position of $19,413,635 at December 31, 2008. The Company has $334,164 of liabilities and no debt. The Company spent $3,138,303 during the twelve months ended December 31, 2009, on exploration activities on its mining interests. At December 31, 2009, the Company had mining interests of $21,971,700, compared to $18,833,397 at December 31, 2008. The majority of expenditures during the twelve months ended December 31, 2009, were incurred on the Big Daddy chromite deposit.

At December 31, 2009, the Company had working capital of $3,079,360, compared to $3,417,713 at December 31, 2008. The Company had cash of $2,716,778 at December 31, 2009, compared to $3,205,855 at December 31, 2008, a decrease of about 15%. The change in cash during the twelve months ended December 31, 2009, is primarily due to cash expenditures for the Company’s exploration activities discussed above, which was offset by private placements that closed on July 24, 2009, August 7, 2009, December 24, 2009, and December 30, 2009, for total gross proceeds of $4,520,400. Refer to “Liquidity and Capital Resources”, below.

The Company plans to spend approximately $2,909,000 resulting from its remaining flow-through commitment at December 31, 2009, of approximately $2,320,000 and the flow-through financing commitment arising from the January 22, 2010, financing of approximately $589,000, on its key projects.

The Company plans to undertake an expanded exploration program on its projects in the McFaulds Lake area. In particular, KWG and Spider have committed to undertake an exploration program on the Big Daddy chromite deposit under which an aggregate of at least $5 million (Spider’s share - $2.5 million and KWG’s share – $2.5 million) will be spent by March 31, 2011. Spider will also engage in a $100,000 diamond drill program on both the Wawa project and Diagnos Initiative property.



www.spiderresources.com	Page 5

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

The Company has sufficient cash on hand to fund its operating costs and its exploration programs at current operating levels for fiscal 2010. Refer to “Liquidity and Capital Resources” below.

See “Mineral Exploration Properties” below.

TRENDS

The Company is a mineral exploration company focused on the acquisition, exploration and development of properties for the mining of viable mineral deposits, more specifically copper, zinc, chromite and diamonds, in Ontario, Canada, and the acquisition of other mineral exploration properties should such acquisition be consistent with the objectives and acquisition criteria of the Company. The Company’s financial success will be dependent upon the extent to which it can make discoveries and on the economic viability of any such discoveries. The development of such assets may take years to complete and the resulting income, if any, is difficult to determine with any certainty. The Company lacks mineral resources and mineral reserves and to date has not produced any revenues. The sales value of any mineralization discovered by the Company is largely dependent upon factors beyond its control, such as the market value of the commodities produced.

Although economic conditions in Canada have improved since the beginning of the year, the Company remains cautious in case the economic factors that impact the mining industry deteriorate. These factors include uncertainty regarding the prices of minerals, and the availability of equity financing for the purposes of mineral exploration and development. The prices of minerals have been volatile in recent periods and financial markets have deteriorated to the point where it has become extremely difficult for companies, particularly junior exploration companies, to raise new capital, even though there are signs the situation is improving. The Company’s future performance is largely tied to the development of its current mining interests and the overall financial markets. Financial markets are likely to be volatile for 2010, reflecting ongoing concerns about the global economy. Companies worldwide have been affected negatively by these trends. As a result, the Company may have difficulties raising equity financing for the purposes of mineral exploration and development, particularly without excessively diluting the interests of its current shareholders. With continued market volatility expected, the Company’s current strategy is to continue exploring the Big Daddy chromite deposit, seek out other prospective resource properties to acquire and explore its Wawa project and Diagnos Initiative property. The Company believes this focused strategy will enable it to meet the near-term challenges while maintaining the momentum on key initiatives. These trends may limit the Company’s ability to develop and/or further explore the Big Daddy chromite deposit and/or other property interests and/or property interests acquired in the future.

Apart from these and the risk factors noted under the heading “Risks and Uncertainties”, management is not aware of any other trends, commitments, events or uncertainties that would have a material effect on the Company’s business, financial condition or results of operations.

MINERAL EXPLORATION PROPERTIES

Over the span of 14 years in the Province of Ontario, Spider has been exploring in a vast region of Northern Ontario, stretching from the coast of James Bay to the western reaches of the James Bay Lowlands (now referred to as the “Ring of Fire exploration area”), and also to the northeast of Lake Superior near the town of Wawa, Ontario. The Company is involved in three project areas in Ontario, known as “Spider #1”, “Spider #3” and “Wawa”. Of these areas, Spider’s main focus remains on the Spider #3 area, which includes the property optioned by Spider and KWG from Freewest where the



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Company can earn up to a 30% interest, the Diagnos property, where the Company has a 50% interest, the McFaulds Lake property, currently under option to UC Resources Inc., which can earn up to a 55% interest in this property, leaving the Company with 30% interest, and the Kyle property, optioned to Renforth, which can earn up to a 55% interest in the property, leaving the Company with 30% interest.

The following table outlines Spider’s projects and level of involvement:

Property	Claims	Hectares	JV details (potential interest)	Commodity sought

Freewest Option	7	1,280	JV with KWG and Freewest (Spider operator until March 31, 2010, then KWG is operator) Spider to earn 30%	Chrome, nickel, PGMs

Diagnos Initiative	22	3,696	JV with KWG (Spider operator) Spider to maintain 50%	Diamonds, base and precious metals

McFaulds Project (W)	51	11,200	UC to earn in from Spider/KWG (UC operator) Spider to reduce to 30%	Copper, zinc
McFaulds Project (E)	73	17,088	UC to earn in on project Spider to reduce to 30%	Copper, zinc
McFaulds Project (N)	13	2,688	UC to earn in on project Spider to reduce to 30%	Copper, zinc

Kyle Project	8	2,048	Renforth to earn in 55% from Spider/KWG (Renforth operator) Spider to reduce to 30%	Diamonds
Renforth claims	15	3,616	Renforth option to reduce to 55% Spider to earn up to 30%	Diamonds, base metals

Wawa Project	45	4,500	JV with KWG (Spider operator) Spider to earn 66 2/3%	Diamonds



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

MacFadyen Project

672

JV with KWG

(KWG operator)

Spider to reduce to 33 1/3 %

Diamonds

Spider #3 Project Area (includes McFaulds, Freewest and Diagnos properties)

The Spider #3 project area is geographically located immediately west of the Spider #1 project area. The project area includes several identified properties, the McFaulds Lake (East and West) VMS (volcanogenic massive sulphide) properties, the Freewest Option property (chromite and PGEs) and the Diagnos Initiative property.

Freewest Option Property

This property, located approximately 15 kilometres southwest of the McFaulds Lake VMS property, includes four 16-unit claims, one 12-unit claim and two additional one-unit mineral claims constituting 78 claim units (1,248 hectare property).

Under the terms of the original agreement with Freewest (see press release December 19, 2005), Spider and KWG agreed to spend an aggregate of $3 million on exploration over a four-year period to earn an initial joint 50% interest in the Freewest Option property. Under this agreement Spider and KWG could earn a cumulative joint 60% interest in the property by delivering a bankable feasibility study on any mineralization identified, and subsequently a cumulative joint 65% interest by arranging financing on behalf of Freewest to put the property into commercial production. At present, Spider and KWG have earned an initial 50% interest in the property by jointly expending a total of $3 million, as announced on January 16, 2009.

On March 27, 2009, the Company negotiated an amendment to the Freewest Option agreement whereby the option earn-in calls for a $15 million, three-year commitment. As a result of this amendment, the Company no longer is required to prepare a bankable feasibility study within 18 months, as had been called for in the 2005 agreement, upon successful completion of documentation evidencing such amendment and the receipt of all required approvals. Under the amendment, Spider would have a $7.5 million commitment over the next three years, of which $2.5 million is required to be spent before March 31, 2010. Spider announced on September 14, 2009, that it has amended and restated the December 2005 option agreement.

During 2006, Spider announced that it had completed a winter drilling program on the property with KWG and Freewest, and had discovered a chrome-platinum-palladium bearing peridotite in hole FW-06-03. Later that year, it was announced that the two high-grade chromitite layers were confirmed yielding assays of 23.4% chrome (34.5% Cr2O3), 0.19 g/t platinum, 0.21 g/t palladium, 0.32 g/t ruthenium, 0.05 g/t rhodium and 0.12% nickel over 1.03 metres followed by 18.6% chrome (28.9% Cr2O3), 0.23 g/t platinum, 0.48 g/t palladium, 0.30 g/t ruthenium, 0.05 g/t rhodium and 0.13% nickel over 0.85 metres. The assaying completed on the entire mineralized zone in the layered peridotite, including the upper and lower chromitite layers, yielded 4.05% chrome and 0.17% nickel over a core length of 16.85 metres. This new chrome-nickel-platinum group element discovery was the first of its kind in the McFaulds Lake area of the Sachigo Greenstone Belt in northern Ontario. In hindsight, this 2006 discovery by Spider’s exploration team identified what has been recognized as a very prospective peridotite now referred to as the Ring of Fire intrusion.



www.spiderresources.com	Page 8

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Exploration results in August 2007 by Noront Resources Ltd. on its nearby (3.6 kilometres to the southwest) Eagle One magmatic massive sulphide (MMS) occurrence renewed interest in the nearby Freewest Option property. A similar geologic unit (as described above for the chrome occurrence) is the host for the Eagle One occurrence. However, the Noront occurrence also had very significant nickel, copper, platinum, palladium and gold, while the Company’s occurrence contains appreciable chrome layers enriched in PGEs (platinum group elements) and nickel, formed in a peridotite magma chamber. Geological models for this type of occurrence suggest a positional relationship between MMS occurrences and the chromite layering observed in the Company’s occurrence. Consequently, the Company undertook an aggressive exploration program that started late in the first quarter of 2008 and continued through the remainder of 2008. The collective project expenditures cost in the order of $3.4 million to year-end 2008, of which the Company expended $1.7 million (the cost of this program was shared equally with KWG). On December 31, 2008, Spider and KWG received notice from Freewest that a 25% interest had been earned by each of KWG and Spider.

During the fourth quarter of 2008, the Company proceeded with the preparation of a National Instrument 43-101 report on the project that had been dubbed the Big Daddy chrome project. The Company engaged Micon International Ltd. to prepare this report and to review the project. This report was filed in the first quarter of 2009 on Sedar. This report contained a “go forward” recommendation for further drilling as required to confirm continuity of mineralization to the northeast and southwest with the goal of completing a mineral resource report for chromite on the property.

During most of fiscal 2008, the Company reported that the main exploration focus of the Spider-KWG joint venture had been on the massive chromite occurrence. This deposit underwent significant drill testing during the year, as did other nearby deposits. The Big Daddy deposit is located approximately 3.6 kilometres northeast of Noront’s Eagle One Magmatic Massive Sulphide (nickel, copper and PGM), or five kilometres northeast of Noront’s Blackbird One and Two (chromite) discoveries, and four kilometres southwest of Freewest’s Black Thor and Black Label chromite discoveries. Over the course of 2008 several drill holes intersected economic grade chromite mineralization, but much more work was needed to quantify the resource. It was determined that chromite mineralization consists of varying widths of a variable tenor, in many instances high tenor of chrome, forming a series of stacked beds. Additional drilling will be required to confirm continuity of the beds from section to section and to the northeast. The deposit remains open to depth as well as along strike in both directions. In addition, near surface drilling of the upward extension to surface has not been completed. A number of faults were noted from the drilling, some of which occur at the contact of the chromite with the surrounding peridotite/dunite. These fault sets are being modeled, as they affect the interpretation and continuity of the mineralization from section to section.

During the first quarter of 2009, the main exploration activity of the Spider-KWG joint venture on the Big Daddy chromite deposit was the completion of gravimetric and magnetic ground geophysical surveys, designed to outline and delineate the geophysically inferred extent of the chromium-enriched deposit. The results of the geophysical surveys infer that the 2006 - 2008 drill program, which consisted of 14 drill holes designed to test the Big Daddy chrome deposit, had only tested the extreme southwest portion of the deposit over a strike length of 400 metres (drill section 9+00NE to drill section 13+00NE). The gravimetric survey results, when coupled with the magnetic survey results, infer that the favourable area of mineralization may extend to drill section 20+00NE and beyond (faulting and/or leveling errors may cause some displacement at line 20+00NE and points further northeast). The deposit remains open to depth and is now geophysically inferred to extend to the northeast for a further 700 metres. Drilling commenced in the third quarter and continued through the fourth quarter and was completed during the first quarter of



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

2010. A series of press releases were issued during Q3 and Q4 2009 providing details and highlights of the drill program.

On October 1, 2009, the Company announced the commencement of drilling at Big Daddy, further advising that the first hole intersected 30.3 metres of chromite mineralization and the second hole intersected 38.0 metres of chromite mineralization.

On October 14, 2009, the Company provided an update on the Big Daddy project, announcing that 2,073 metres had been completed to date in eight holes. Visual observations of drilling were highlighted by hole FW-09-29 that had intersected 74.9 metres of massive chromite mineralization. In addition, in the October 14 release, Spider reported preliminary metallurgical test results, concluding that >40% Cr2O3 can be considered direct-shipping ore with 1.9 Cr:Fe ratio. The early stage metallurgical studies will guide both ongoing sampling requirements during drilling and subsequent resource modelling and any subsequent beneficiation studies. The result of conducting gravity separation test on eight selected samples covering a range from low grade to high-grade chromite mineralization led to the following conclusions;

·	Some of the massive chromite mineralized rock has a grade >40% Cr2O3, which can be considered direct-shipping ore with 1.9 Cr:Fe ratio;
·	medium grade ore, being of grades between 20-40% Cr2O3, can likely be upgraded to saleable material; and
·	grind size needs to be optimized in future testing to improve recoveries at low and medium grades.

On November 16, 2009, the Company reported progress on drilling at Big Daddy, explaining that the strike and depth of the Big Daddy chromite prospect was expanding to northeast and beyond 250 metres depth based upon visual observations. Hole FWR-09-43 reportedly encountered 93 metres of chromite mineralization, including 76 metres of observed massive chromite.

On December 7, 2009, the Company reported the receipt of analytical results from the first seven holes from the 2009 drilling program on Big Daddy, highlighted by hole FW-09-29, which encountered 75.2 metres of chromite mineralization averaging 43.41% Cr2O3, followed by 1.8 metres averaging 2.18 g/t PGE (Pt+Pd). Spider also reported that six of the seven holes reported herein encounter chromite mineralization in excess of 35% Cr2O3 over significant widths.

On January 7, 2010, the Company reported that diamond drilling on the Big Daddy project had resumed, with the intent to complete drilling sufficient to complete a NI 43-101 compliant resource estimate during Q1 2010. In addition, the company reported results of nine holes from the 2009 drilling at Big Daddy, highlighted by hole FW-09-36, which encountered 86.2 metres of chromite mineralization between 9.8 metres to 96.0 metres downhole. The initial 11.2 metres of chromite mineralization in this hole averaged 40.14% Cr2O3; the last 48.35 metres averages 41.35% Cr2O3. In addition, hole FW-09-33, after passing through 11.0 metres that averaged 40.29% Cr2O3, entered a narrow nickel sulphide filled fault zone that averages 2.74% nickel, 0.12% cobalt and 1.04 g/t Pt+Pd over 1.0 metres. A sample selected for petrographic analysis was determined to contain a low temperature alteration assemblage of minerals including godlevskite along with veinlets of mackinawite, which infers a possible nearby primary nickel source. Eight of the nine holes reported on January 7, 2010, encountered chromite mineralization in excess of 35% Cr2O3 over significant widths.

On January 22, 2010, the Company reported results of the remaining six holes from the 2009 drilling at Big Daddy, highlighted by hole FW-09-43, which had encountered two zones of massive chromite



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

mineralization, 24.0 metres averaging 35.75% Cr2O3, as well as 57.0 metres averaging 40.52% Cr2O3, separated by 11.0 metres of thin, massive beds of chromite averaging 15.47% Cr2O3. All six holes reported on this date for Big Daddy encountered chromite mineralization in excess of 35% Cr2O3 over significant widths. Spider also reported that drilling continues, and that it anticipated completion of drilling by the end of January.

On February 16, 2010, Spider reported that all priority drillholes for the 2010 program had been completed, and initial analytical results from 2010 drilling were arriving. Hole FW-10-48 encountered two zones of massive chromite mineralization, 14.85 metres averaging 39.52% Cr2O3, as well as 32.4 metres averaging 42.51% Cr2O3. In light of a First Nations blockade on neighbouring projects, negotiations were underway with First Nations communities to resolve a list of issues related to exploration in the general area. The blockade was subsequently removed in March.

On March 5, 2010, all analytical results were completed and were reported, highlighted by hole FW-09-50, which had encountered chromite mineralized envelope of 126.3 metres, of which 63.3 metres averaged 41.93% Cr2O3 with Cr:Fe ratio of 1.96. As well, seven of the final eight holes encountered grades in excess of 35% Cr2O3. A National Instrument 43-101 compliant resource estimate was to commence on the Big Daddy chromite deposit.

Spider’s expenditure on this project for fiscal 2009 amounted to $2,855,859.

Diagnos Initiative Properties

These properties are prospective for kimberlite and are located in the vicinity of the Kyle properties in the James Bay Lowlands area of Northern Ontario. The properties were acquired by staking and by a purchase agreement in 2005. During the first quarter of 2006 the Company completed ground geophysical surveying on the six properties. This exploration work has been compiled and interpreted as required for drill positioning, and the Company has presented the results to its joint venture partner for discussion and planning. The Company intends to continue the review of the geophysical results and make plans for drilling selected anomalies during fiscal 2010. Consequently, discretionary exploration expenses for 2010 have been allocated to this project.

The cost of this program, if undertaken, will be shared equally with KWG Resources. It is anticipated that one target will be drill-tested during 2010 on this project at an estimated cost of $200,000. Spider is responsible for 50% of the cost of this program.

McFaulds Lake VMS Properties

This project covers three properties, the McFaulds (East) property, the McFaulds (West) property and the McFaulds (North) property (the latter property is located north of McFaulds (East) property). Collectively, these volcanogenic massive sulphide (VMS) properties cover approximately 31,000 hectares and are located in the western portion of the James Bay Lowlands. The VMS potential of this diamond exploration project became apparent in 2002 while the company was exploring in joint venture with De Beers Canada Exploration Limited. As a result of the discovery of VMS-style mineralization, the Company and its joint venture partner, KWG, completed several exploration campaigns, including diamond drilling programs, during the period 2003 to early 2007, outlining several VMS-style occurrences, including two where definition drilling was completed (McFaulds #1 and #3 VMS occurrences).



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

On March 7, 2007, the Company announced the signing of a letter of intent with UC Resources Ltd. (“UC”) regarding a four-year exploration program on the McFaulds Lake project. This LOI outlined the terms and conditions upon which UC has an option to earn-in up to a 55% undivided interest in the McFaulds Lake project, leaving 45% to be shared pro rata by the Company and KWG. This agreement was amended in March 2009. To date, UC has earned a 25% interest in the project and must incur exploration expenditures of at least an additional $1.25 million on or before the third anniversary date of the LOI in order to earn an additional 15% vested interest in the property, bringing UC’s interest level to 40%. UC has submitted to the Company audited records of expenditures incurred totaling in excess of $1.25 million. These are currently being reviewed in conjunction with the technical reports outlining the program, and once approved UC will be deemed to have earned 40% interest in the project. Upon spending an additional $1.25 million prior to the fourth anniversary (prior to March 2011), UC can earn the entirety of its 55% interest. Then the option agreement would be fulfilled and a formal joint venture would be entered into, with UC holding 55% interest and the Company and KWG holding the remaining 45% interest. The Company would then start spending during the KWG dilution phase, during which KWG’s interest can be reduced to 15%, leaving the Company with 30%, after which all parties contribute pro rata or undergo additional dilution.

During the latter part of 2008, Scott Wilson Roscoe Postle Associates Inc. completed a review of the historical drilling on the McFaulds #1 and #3 occurrences and provided indicated and inferred resource estimates for the two occurrences. The estimates were included in a technical report that was independently prepared and filed on SEDAR in the third quarter of 2008. The following is a summary only, the reader is referred to the full report, “UPDATED TECHNICAL REPORT ON THE MCFAULDS LAKE PROJECT PORCUPINE MINING DIVISION JAMES BAY LOWLAND, ONTARIO, CANADA” which may be viewed on SEDAR at www.sedar.com. The following tables provide details of the resource estimates:

Spider Resources – McFaulds 3 Deposit

Location	Indicated Resources
Location	Tonnes	% Cu	% Zn
Copper-Zinc Domain	802,000	3.75	1.1
Total, Indicated	802,000	3.75	1.1

Notes:

	1.	CIM definitions were followed for mineral resources.
	2.	Mineral resources are estimated at cutoff grades of 1.5% Cu
	3.	Mineral resources are estimated using an average long-term copper price of US$2.50 per pound.
	4.	A minimum mining width of two metres was used.

Spider Resources – McFaulds 1 Deposit

Location	Inferred Resources
	Tonnes	% Cu	% Zn



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Copper Domain	279,000	2.13	0.58
Zinc Domain	560,700	0.48	3.27
Total, Inferred	839,700	1.03	2.38

Notes:

	1.	CIM definitions were followed for mineral resources.
	2.	Mineral resources are estimated at cutoff grades of 1.5% Cu and 1% Zn
	3.	Mineral resources are estimated using an average long-term copper price of US$2.50 per pound.
	4.	A minimum mining width of two metres was used.

At present the McFaulds Lake project area is the focus of attention as a result of some very encouraging news by other explorers in the region; namely Noront and its recent magmatic massive sulphide (“MMS”) occurrence located 27.4 km to the west-southwest of the two main McFaulds Lake VMS occurrences. The MMS style mineralization encountered by Noront contains appreciable copper, nickel, platinum, palladium and gold. The geophysical anomalies associated with this type of occurrence are slightly different than those of VMS style mineralization. The historical geophysics over the McFaulds Lake projects (E and W) were reviewed in late 2007 by UC to ascertain whether there are similar-looking MMS anomalies on the property. Spider’s management assisted in this review and planning process. As a result of the review, UC agreed to participate in a new regional AeroTEM2 airborne survey with others in the area. This survey commenced in late 2007 and was completed in early 2008; results were immediately reviewed. Several anomalous areas were prioritized for ground geophysical follow-up that included line cutting, magnetic surveying and electromagnetic surveying. Drilling commenced on the western property in October 2008 with UC completing five holes totaling 1,211 metres. The mineralization found in the fourth hole (UC-08-04) was intriguing, with three mineralized zones intersected. The upper mineralization was a sulphide zone with massive to semi-massive pyrrhotite that likely gave rise to the magnetic and EM anomalies. This intersection has potential importance as the VMS deposits discovered further east near McFaulds Lake are known to have large thickness of massive barren pyrrhotite, pyrite and magnetite that grades into chalcopyrite-sphalerite-rich sections. The deepest mineralized intersection consisted of erratic, thinly banded and disseminated sphalerite over about three metres. This is interpreted as being related to nearby sources of zinc deposited underwater during fumarolic activity that may have created thicker zinc-rich deposits elsewhere in the area. It was recommended that this mineralization be followed up with more drilling. UC announced results of the drilling in early 2009, and only anomalous values of copper and zinc were encountered in the holes.

In late 2008, UC commenced line cutting followed by detailed ground geophysics on targets that were too wet to access under summer conditions and that had geophysically postulated chrome potential. Reviews of recent and historical airborne geophysics along a northeast trending magnetic rendered feature continuation of ultramafic sill from the Big Daddy chrome occurrence, passing through Freewest’s Black Thor chromite occurrence, inferred prospective chromite targets located in the western portion of the McFaulds East claim block just west of McFaulds #1 and #3 VMS deposits, near the common boundary shared with Noront. Intense magnetic anomalies are interpreted to the southwest towards the new chromite discovery of Freewest, extending into the Freewest option property. The ground geophysical surveys completed included magnetic and gravimetric surveying. Results were reviewed by the joint venture partners and were inconclusive. Additional work is currently being considered.

During the latter part of the second quarter of 2009, UC engaged Geotech Ltd. to complete a ZTEM airborne geophysical survey over selected areas in the East and West properties. Diamond drilling ensued



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

during early August 2009 by UC as a follow-up on these surveys. Three holes were drilled totaling 623 metres, one on the western property and two on the eastern property.

The first hole on the western property tested a coincident positive magnetic anomaly and a strong EM conductor. The hole cut a gradational lapilli tuff to feldspar porphyry contact, intersecting very weakly disseminated pyrite mineralization between 55.9 metres and 62.5 metres. In addition the hole intersected very anomalous gold mineralization of 2,620 ppb Au between 31.35 and 31.85 metres, followed by 1,470 ppb between 31.85 and 32.9 metres, with quartz injection and weak, fine-grained pyrite mineralization.

The second and third holes in the summer 2009 drill campaign by UC tested for sulphide mineralization in the vicinity of McFaulds #6 occurrence, located on the eastern property. The second hole intersected 0.8 metres (148.3 to 149.1 m) of mainly massive magnetite interbedded with 20 cm wide massive pyrrhotite with chalcopyrite and minor pyrite intervals. The 0.8 metre section averaged 2.4% copper, 0.13% Zn and 3.4g/t Ag. The sulphide mineralization was observed at the contact between volcanic lapilli tuff and volcanoclastic sediments containing chert and cherty sediments. The third hole failed to intersect any mineralization of interest.

During Q4 2009, UC completed an additional five holes totalling 697 metres of drilling on the eastern block of the optioned property. The first two holes were drilled to test an anomaly (near McFaulds #7) located to the southeast of the Big Daddy chrome project, and southwest of McFaulds Lake VMS deposits. Only short intercepts of chalcopyrite and sphalerite were encountered. Anomalous values of copper and zinc were received (UC-09-08 returned 0.613% Cu over 1.5 m between 71.2 and 72.7 metres downhole, UC-09-09 returned 0.933% Zn over 0.5 m between 51.2 and 51.7 metres downhole). A third hole was drilled to test an anomaly located on the western portion of the eastern block near the extreme northwestern border of the property. Hole UC-09-10 failed to intersect any significant mineralization. Two holes were also drilled on the northern claim group (of the eastern property), testing coincidental magnetic and electromagnetic anomalies, both of which failed to encounter any significant mineralization.

Because this project is currently funded by UC, Spider has no financial requirements for it during fiscal 2009. Furthermore, information concerning the work done on the property by UC has been provided to Spider by UC. While management of Spider believes this information to be correct, it has relied on UC in respect of the information provided.

Spider #1 Project Area (includes Kyle and MacFadyen properties)

The Spider #1 project is a regional reconnaissance project located on the western edge of the James Bay Lowlands in northern Ontario. The project was initiated in the early 1990s to explore diamond bearing kimberlite bodies. The project encompasses numerous identified kimberlite occurrences and two distinct project areas, the Kyle project and the MacFadyen project. The project area (except for the Kyle Lake #1 kimberlite) is subject to an agreement whereby Ashton Mining of Canada may acquire a 25% interest under certain conditions. The Company maintains an interest in a minimum number of claims that effectively cover the identified kimberlites. The Kyle properties are currently the subject of an option agreement with Renforth Resources Inc., (formerly Wycliffe Resources Inc.), whereby Renforth can earn up to a 55% interest in the Kyle properties.

Kyle Properties



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

properties require additional exploration work, having been the subject of only preliminary drilling in 1994 and 1995 by the Company.

These properties are currently subject to an option agreement with Renforth whereby Renforth can earn up to a 55% interest. In order to earn its interest, Renforth was to make an aggregate of $6 million in exploration expenditures by June 30, 2009, with annual exploration expenditure requirements of $2.0 million. The option agreement was amended in 2007 whereby Renforth advised that it failed to complete the minimum expenditure due by June 30, 2007, and requested an amendment whereby it could make payment in lieu of expenditures. Both Spider and KWG agreed to the amendment. Renforth sought and received a one-year extension on the next work commitment that was due on June 30, 2008. In partial payment for these concessions, Renforth agreed to pay Spider and KWG shares valued at $1.0 million, to be shared in a pro rata manner between Spider and KWG, the levels to be reflective of each party’s current interest. At the date of this MD&A, Spider has not received the Renforth shares, although Renforth has advised that it intends to deliver the shares shortly.

In addition, Renforth must contribute all of its existing claim holdings (15 claims covering 3,616 hectares) in the Attawapiskat River area, to be added to the Kyle project area.

Spider/KWG will retain a collective 45% in the Kyle properties once Renforth has earned its 55% interest, and Renforth will transfer a 45% interest in its own properties in the project area to Spider/KWG. No less than 75% of the annual $2 million expenditure must be dedicated to the Kyle properties in order for Renforth to acquire its 55% interest. Renforth agreed to fund the project in its entirety for the first three years and as such, is the operator during the earn-in option period.

Pursuant to the revision to the Spider/KWG joint venture dated May 12, 2006, KWG agreed to not contribute further to Spider’s exploration program on the Kyle kimberlite project and as such appointed Spider as manager. In May 2006, both parties were deemed to have a 50% interest in the Kyle kimberlite project. Once Renforth has earned its 55% interest in the project, the underlying agreement terms will apply to Spider and KWG in determination of their respective interests.

During 2008 Renforth proceeded with the procurement of mini-bulk samples for diamond content that included the testing of each of the remaining Kyle kimberlites, which had not yet undergone a minimum sampling program of three or four tonnes. The Company and KWG tested Kyle Lake #1 and Kyle #3 by mini-bulk sampling much earlier with favourable results. Renforth intends on comparing information from each of the five kimberlites to determine which kimberlite(s) warrant much larger tests. The sampling has been completed, and samples are now awaiting processing for commercial diamond content, as well as micro-diamond content, on eight-kilogram samples taken from the feed stream to the commercial size diamond sampling plant.

As a result of this project being funded by Renforth’s earn-in agreement, Spider expects to only contribute a minor amount of the spending. Furthermore, information concerning the work done on the property by Renforth has been provided to Spider by Renforth. While management of Spider believes this information to be correct, it has relied on Renforth in respect of the information provided.

MacFadyen Property

This property includes three diamond-bearing kimberlites (MacFadyen-1, MacFadyen-2 and Good Friday) located eight kilometres north of the Victor Diamond Mine project of De Beers Canada Explorations Inc. that commenced full production in August 2008.



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

The Company announced in May 2006 that under a revision to the joint venture with KWG, the Company had permitted its interest level to be diluted to one-third, allowing KWG to expend sufficient funds on its own to obtain up to two-thirds. An exploration agreement was negotiated with the Attawapiskat First Nation covering further exploration programs to be undertaken at the property by KWG over the next two years. Upon its signing, KWG commenced a reconnaissance program in September 2006, and made preparations for a winter drilling program to sample each of the five kimberlite pipes that constitute the MacFadyen cluster.

Initial results of the kimberlite processing of a drilling program carried out by KWG were reported on June 21, 2007, when KWG announced that a 0.23 quarter-carat diamond had been recovered from one of its MacFadyen kimberlite samples. Bulk sample processing and diamond sorting and picking were executed at the SGS Lakefield Research Laboratory in Lakefield, Ontario.

Further work on the project was planned by KWG to commence in early 2008; however, this project was curtailed due to the unavailability of sampling equipment at the project site. It is expected that KWG will resume work subject to availability of sampling equipment sometime in 2010.

As a result of this project being the focus of KWG until Spider is diluted to a one-third interest, Spider does not expect to expend any funds on it in the near future.

Project #6 Wawa Diamond Property

This project is located 35 km north of Wawa in central Ontario on the northeast shore of Lake Superior along the Trans-Canada Highway (Hwy 17), encompassing 44.2 square kilometres. On February 20, 2006, Spider and KWG announced that they recovered 1,337 diamonds from an 8-kg sample at the Wawa project.

On March 23, 2006, Spider and KWG received a SGS Lakefield Research Ltd. report on encouraging rock characteristics of the Wawa diamond project. This report described potential beneficiation results based upon physical properties of the xenolith portion of the rock versus the matrix portion of the rock. Additional test work concluded that most of the diamonds in the rock are contained within the xenolith; this was verified by caustic dissolution diamond analysis. Tests were undertaken to better understand the overall recoverability of diamond from rock, and to determine which process(es) can be used to separate the diamond-bearing xenolith from the less diamondiferous matrix. Spider initiated plans to follow up with SGS’s recommendations, including diamond drilling the main diamond occurrence. A technical report was prepared and filed on SEDAR during the first quarter of 2006 containing recommendations for this drilling follow-up.

The Company continued to monitor the exploration activity in this area until the fall of 2008. In the last few days of Q3 2008, a drill rig was mobilized to this project and commenced drilling to test to depth the main diamond showing in Lalibert Township.

In October 2008, Spider/KWG completed a drill program entailing four short, HQ core holes totaling 307 metres. These holes were designed to undercut a lamprophyre dyke that hosts numerous diamond bearing xenoliths. This dyke had been previously exposed in 2004/2005 by mechanical stripping over a strike length in excess of 300 metres. The dyke varies in exposed width from 8 to 22 metres, and dips an estimated 45 degrees towards the northeast. Diamonds had been recovered from all but two of the 39 surface grab or chip-channel samples collected from the length of the dyke. Diamonds had been previously



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

determined to be preferentially located in talc-actinolite xenoliths. The most diamonds recovered were from a 30.11 kilogram sample of talc-actinolite xenoliths (sample # LAL-04-234), which yielded 1,351 diamonds with two dimensions less than 0.5mm, 267 diamonds with two dimensions greater than 0.5mm and less than 1.0mm and 14 diamonds with two dimensions greater than 1.0mm.

The holes were drilled on lines spaced 100 metres apart with an initial inclination of -45 degrees towards the southwest to cut the dyke at approximately 40 metres below surface. Samples were normally 1.0 m in length; each sample weighed approximately 10 kilograms. 42 samples were collected and were submitted to SGS Lakefield for caustic dissolution diamond analysis. These samples were processed during Q3 2009.

Subsequent to the end of Q3 2009, the Company received microdiamond results pertaining to the four holes drilled during 2008. Highlights of the caustic dissolution test results included the recovery of a total of 1,095 diamonds from 336 kilograms of xenolith bearing lamprophyre dyke core selected from four diamond drill holes. Of these, eight diamonds were retained on a +0.425 mm sieve, 45 were retained on a +0.300 mm sieve, 140 were retained on a +0.212 mm sieve, 301 were retained on a +0.150 mm sieve and 601 were retained on a +0.106 mm screen. Five of the 8-kilogram samples, in which the number of xenoliths ranged between 6 and 10 in the sample interval, had a group weight for only those diamonds retained on +425 mm screen of 0.01339 carats (equating to 0.33 carats per tonne for 40 kilogram of selected samples). Additional work is being considered to follow up on these encouraging results.

Following are plans related to the Company’s properties for fiscal 2010. Planned expenditures for fiscal 2010 have been estimated based upon expenditure requirements.

Project/Property Name	Plans for Project	Planned Expenditures	Timing for Completion of Planned Activities	Remaining Expenditures	Remaining Commitment
Freewest Option	Exploration with intent to define resource	$2,500,000 (1)	March 31, 2011	$2,500,000	$2,500,000 (3)
Diagnos Initiative	Diamond drilling	$100,000	Q4 ‘10	$100,000	$0
McFaulds Project (W)	UC to continue its earn-in	$0	NA	$0	$0
McFaulds Project (E)	UC to continues its earn-in	$0	NA	$0	$0
McFaulds Project (N)	UC to continue its earn-in	$0	NA	$0	$0



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Kyle Project Renforth claims	Renforth to continue its earn-in	$0	NA	$0	$0
Wawa Project	Diamond drilling	$100,000 (2)(4)	Q4 ‘10	$100,000	$0
MacFadyen Project	KWG to continue its earn-in to 66.6%	$0	NA	$0	$0

	(1)	Expenditures budgeted for fiscal 2009 amounted to $2,550,502 – actual amount spent amounted to $2,855,859;
	(2)	Expenditures budgeted for fiscal 2009 amounted to $100,000 – actual amount spent amounted to $105,538;
	(3)	Additional $2,500,000 to be completed by March 31, 2012; and
	(4)	Exploration budget of $200,000 - Spider is responsible for 50% of the cost of the program.

TECHNICAL DISCLOSURE

Mr. Neil Novak, P.Geo., President, Chief Executive Officer and director of the Company, is a Qualified Person as defined under National Instrument 43-101. Mr. Novak has reviewed and verified the technical information in this MD&A.

ENVIRONMENTAL LIABILITIES

The Company is not aware of any environmental liabilities or obligations associated with its mining interests. The Company is conducting its operations in a manner that is consistent with governing environmental legislation. Pertaining to the Freewest Option project, AECOM has been retained by the project operator to commence an Environmental Base Line Study.

OVERALL OBJECTIVE

The Company’s business objective is to discover a viable mineral deposit, more specifically copper, zinc, chromite and diamonds, on a property on which it holds an interest. The Company is in the business of exploring its mining interests and has not yet determined whether these properties contain an economic mineral deposit. The recoverability of the amounts shown for mining interests is dependent upon: the selling price of copper, zinc, chromite and diamonds or any other commodity that is discovered at the time the Company intends to mine its properties; the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government policies and regulations; and future profitable production or proceeds from disposition of such properties.

To date, the Company has not discovered an economic deposit. While discovery of ore-bearing structures may result in substantial rewards, it should be noted that few properties that are explored are ultimately developed into producing mines.

The Company notes that although the exploration of its existing projects is positive, mineral exploration in general is uncertain. As a result, the Company believes that by acquiring additional mineral properties, it



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

is able to better minimize overall exploration risk. In conducting its search for additional mineral properties, the Company may consider acquiring properties that it considers prospective based on criteria such as the exploration history of the properties, the location of the properties, or a combination of these and other factors. Risk factors to be considered in connection with the Company’s search for and acquisition of additional mineral properties include the significant expenses required to locate and establish mineral reserves; the fact that expenditures made by the Company may not result in discoveries of commercial quantities of minerals; environmental risks; risks associated with land title; the competition faced by the Company; and the potential failure of the Company to generate adequate funding for any such acquisitions. See “Risks and Uncertainties” below.

SELECTED ANNUAL INFORMATION


	Year Ended December 31, 2009 ($)	Year Ended December 31, 2008 ($)	Year Ended December 31, 2007 ($)

Net loss for the year	(748,277)	(716,861)	(41,336)

Basic and diluted loss per share	(0.00)	(0.00)	(0.00)

Total assets	25,385,224	22,417,191	22,003,899

Future income tax liability	2,285,206	2,837,475	2,688,582

	·	The net loss for the year ended December 31, 2009, consisted of income from an operator fee from KWG of $250,943 and a future income tax recovery of $626,019. These amounts were offset by (i) stock option compensation of $427,100; and (ii) other working capital expenditures incurred to maintain the operations of the Company.

	·	The net loss for the year ended December 31, 2008, consisted primarily of a future income tax recovery of $460,107. This amount was offset by (i) stock option compensation of $457,800; and (ii) other working capital expenditures incurred to maintain the operations of the Company.

	·	The net loss for the year ended December 31, 2007, consisted primarily of a future income tax recovery of $571,352 that was offset by other working capital expenditures incurred to maintain the operations of the Company.

	·	As Spider has no revenue, the Company’s ability to fund its operations is dependent upon its securing financing through the sale of equity or assets. The value of any resource property asset is dependent upon the existence of economically recoverable mineral reserves, the ability to obtain the necessary financing to complete exploration and development, and the future profitable production or proceeds from disposition of such properties. See “Trends” above and “Risks and Uncertainties” below.



www.spiderresources.com	Page 19

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Exploration activity is typically higher in the fourth quarter than in second and third quarters due to the greater number of activities that can be carried on in the James Bay lowlands after freeze-up.

SUMMARY OF QUARTERLY RESULTS

	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
	December 31,	September 30,	June 30,	March 31,
	2009	2009	2009	2009
Revenue (including interest and other income)	$250,943	$0	$0	$0
Expenses	$534,229	$297,863	$548,549	$244,598
Gain on sale of marketable securities	$0	$0	$0	$0
Future income tax (recovery)	($626,019)	$0	$0	$0
Net income (loss)	$342,733 (1)	($297,863) (2)	($548,549) (3)	($244,598) (4)
Net income (loss) per share basic	$0.00	($0.00)	($0.00)	($0.00)
Net income (loss) per share diluted	$0.00	($0.00)	($0.00)	($0.00)
Cash flows from (used in) operating activities	($244,174)	($368,833)	($140,005)	($344,908)
Cash and cash equivalents, end of period	$2,716,778	$3,238,880	$2,261,080	$2,631,092
Assets	$25,385,224	$23,567,913	$21,722,068	$22,087,429
Long term liabilities	$2,285,206	$2,923,025	$2,923,025	$2,923,025

	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
	December 31,	September 30,	June 30,	March 31,
	2008	2008	2008	2008
Revenue (including interest income)	$0	$0	$0	$0
Expenses	$732,804	$163,338	$157,892	$122,934
Gain on sale of marketable securities	$0	$0	$0	$0
Future income tax (recovery)	($460,107)	$0	$0	$0
Net income (loss)	($272,697) (5)	($163,338) (6)	($157,892) (7)	($122,934) (8)
Net income (loss) per share basic	($0.00)	($0.00)	($0.00)	($0.00)
Net income (loss) per share diluted	($0.00)	($0.00)	($0.00)	($0.00)



www.spiderresources.com	Page 20

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
	December 31,	September 30,	June 30,	March 31,
	2008	2008	2008	2008
Cash flows from (used in) operating activities	($375,190)	$59,286	($370,928)	($231,955)
Cash and cash equivalents, end of period	$3,205,855	$4,102,592	$4,602,542	$4,653,526
Assets	$22,417,191	$22,852,916	$22,548,038	$22,136,982
Long term liabilities	$2,837,475	$3,392,082	$3,392,082	$3,392,082

Notes:

(1) The net income of $342,733 principally relates to a future income tax recovery of $626,019 and an operator fee of $250,943. These amounts were partly offset by (i) professional fees of $54,641; (ii) advertising and promotion of $38,470; (iii) consulting fees of $108,900; and (iv) stock option compensation of $207,000. All other expenses related to general working capital purposes.

(2) The net loss of $297,863 principally relates to (i) professional fees of $62,541; (ii) advertising and promotion of $61,096; and (iii) consulting fees of $40,500. All other expenses related to general working capital purposes.

(3) The net loss of $548,549 principally relates to (i) stock-option compensation of $220,100; (ii) consulting fees of $95,800; (iii) shareholder relations of $83,219; and (iv) professional fees of $54,450. All other expenses related to general working capital purposes.

(4) The net loss of $244,598 principally relates to (i) advertising and promotion of $48,838; (ii) professional fees of $47,870; (iii) consulting fees of $47,083; and (iv) travel of $24,247. All other expenses related to general working capital purposes.

(5) The net loss of $272,697 principally relates to (i) stock based compensation of $457,800; (ii) future income tax recovery of $460,107; (iii) professional fees of $60,000; and (iv) consulting fees of $47,500. All other expenses related to general working capital purposes.

(6) The net loss of $163,338 principally relates to (i) accounting and corporate services of $37,004; (ii) consulting fees of $32,500; (iii) management fees of $24,011; and (iv) professional fees of $15,030. All other expenses related to general working capital purposes.

(7) The net loss of $157,892 principally relates to (i) shareholder relations expense of $50,576; (ii) consulting fees of $25,000; (iii) management fees of $24,000 and (iv) professional fees of $16,060. All other expenses related to general working capital purposes.

(8) The net loss of $122,934 principally relates to (i) shareholder relations expense of $27,239; (ii) consulting fees of $17,000; (iii) management fees of $24,446 and (iv) accounting and corporate services of $13,418. All other expenses related to general working capital purposes.

RESULTS OF OPERATIONS



www.spiderresources.com	Page 21

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Twelve months ended December 31, 2009, compared with twelve months ended December 31, 2008

The net loss from operations for the twelve months ended December 31, 2009, was $748,277 or $0.00 per share, compared to net loss of $716,861 or $0.00 for the comparative period in 2008. The $31,416 increase in the loss from operations is driven by several variables, including:

The Company incurred a decrease in stock-based compensation of $30,700 for the twelve months ended December 31, 2009, compared to the twelve months ended December 31, 2008. The decrease can be attributed to the grant of 13,600,000 incentive stock options pursuant to the Company’s stock option plan in fiscal 2009, compared to 10,900,000 incentive stock options issued in fiscal 2008. The incentive stock options issued vest in accordance with the stock option plan. The following is a list of incentive stock options issued in fiscal 2009:

Number of Stock Options Issued	Exercise Price ($)	Expiry date
7,100,000 (1)	0.10	April 21, 2014
4,500,000 (2)	0.10	December 21, 2014
2,000,000 (3)	0.10	December 21, 2014
13,600,000 (a)

The following is a list of incentive stock options issued in fiscal 2008:

Number of Stock Options Issued	Exercise Price ($)	Expiry date
10,900,000 (4)	0.10	October 2, 2013
10,900,000 (a)

	(a)	Refer to additional disclosure regarding incentive stock options below for a break-down of the incentive stock options granted.

	(1)	On April 21, 2009, the Company granted an aggregate of 7,100,000 incentive stock options to directors, officers and consultants of the Company exercisable over a five-year period at a price of $0.10 per share. The fair value of these incentive stock options at the date of the grant was estimated using the Black-Scholes valuation model with the following assumptions: a five year expected term; 127% volatility; risk-free interest rate of 1.87% per annum; and a dividend rate of 0%. The fair value assigned to these incentive stock options was $220,100.
	(2)	On December 21, 2009, the Company granted an aggregate of 4,500,000 incentive stock options to directors and officers of the Company exercisable over a five-year period at a price of $0.10 per share. The fair value of these incentive stock options at the date of the grant was estimated using the Black-Scholes valuation model with the following assumptions: a five year expected term; 167% volatility; risk-free interest rate of 2.57% per annum; and a dividend rate of 0%. The fair value assigned to these incentive stock options was $207,000.



www.spiderresources.com	Page 22

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	(3)	On December 21, 2009, the Company granted an aggregate of 2,000,000 incentive stock options to an investor relations consultant exercisable over a five-year period at a price of $0.10 per share. The fair value of these incentive stock options at the date of the grant was estimated using the Black-Scholes valuation model with the following assumptions: a five-year expected term; 167% volatility; risk-free interest rate of 2.57% per annum; and a dividend rate of 0%. The fair value assigned to these incentive stock options was $92,000. These incentive stock options will vest quarterly over a period of one year.
	(4)	On October 2, 2008, the Company granted an aggregate of 10,900,000 incentive stock options to various directors, officers and consultants of the Company at an exercise price of $0.10 per share for a five-year period. The fair value of these incentive stock options at the date of the grant was estimated using the Black-Scholes valuation model with the following assumptions: dividend yield 0%; expected volatility of 136%; risk-free interest rate of 3.02%; and an expected term of five years. The fair value assigned to these incentive stock options was $457,800.

Several variables are used when determining the value of incentive stock options using the Black-Scholes valuation model:

	o	The expected term: the Company used the expected term of five years, which is the maximum term ascribed to these incentive stock options, for the purposes of calculating the value of these incentive stock options. The Company chose the maximum term because it is difficult to determine with any reasonable degree of accuracy when these incentive stock options will be exercised.
	o	Volatility: the Company used historical information on the market price of its common shares to determine the degree of volatility at the date the incentive stock options were granted. Therefore, depending on when the incentive stock options were granted and the period of historical information examined, the degree of volatility can be different when calculating the value of different incentive stock options.
	o	Risk-free interest rate: the Company used the interest rate available for government securities of an equivalent expected term as at the date of the grant of the incentive stock options. The risk-free interest rate would vary depending on the date of the grant of the incentive stock options and the expected term of the incentive stock options.
	o	Dividend yield: the Company has not paid dividends in the past because it is in the development stage and has not yet earned any significant income. Also, the Company does not expect to pay dividends in the foreseeable future because it does not expect to bring its mineral properties into production and earn significant revenue any time soon. Therefore, a dividend rate of 0% was used for the purposes of the valuation of the incentive stock options

Incentive stock options were issued to attract key personnel to work for the Company.

Professional fees during the twelve months ended December 31, 2009, were $219,502 (twelve months ended December 31, 2008 - $99,732). The increase of $119,770 resulted from an increase in services provided by legal counsel in relation to increased corporate activity during the twelve months ended December 31, 2009, compared to the corresponding period in 2008.



www.spiderresources.com	Page 23

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	·	The increase of $170,283 in consulting fees during the twelve months ended December 31, 2009, over the comparative period in 2008 resulted from (i) fees paid to the Chief Financial Officer for a full year; and (ii) bonuses paid to consultants in accordance with agreements and board approval. No bonuses were granted in the comparative period in 2008.

	·	The $6,848 decrease in general and administration expenses for the twelve months ended December 31, 2009, over the comparative period in 2008 is a direct result of a decrease in Part XII.6 tax (Canada) on the Company’s flow-through obligation in fiscal 2009 compared to fiscal 2008.

	·	Advertising and promotion expense increased by $114,753 during the twelve months ended December 31, 2009, over the comparative period in 2008 as a result of the Company expensing its share of the Air Canada Suite License Fee (the “license”) over the expected term of the license, website development and maintenance, investor relation expenditures and increased corporate activity.

	·	The increase in travel expense of $40,866 during the twelve months ended December 31, 2009, over the comparative period in 2008 is a result of key management personnel being required to attend various meetings during the period.

	·	The increase in operator’s fee of $250,943 is a result of a 5% operator cost based on the total invoiced expenditures on the Big Daddy chromite deposit, which was billed at year end. Spider earned a total of $250,943 as the operator of the Big Daddy chromite deposit.

	·	The increase in future tax recovery of $165,912 is a result of differences recognized between the accounting cost and tax cost of the Company’s assets.

	·	Other expense fluctuations can be related to small variances seen in accounting and corporate services, management fees, transfer agent, listing and filing fees, occupancy costs, interest and bank charges and insurance.

Three months ended December 31, 2009, compared with three months ended December 31, 2008

The net income from operations for the three months ended December 31, 2009, was $342,733 or $0.00 per share, compared to net loss of $272,697 or $0.00 for the comparative period in 2008. The $615,430 increase in income from operations was driven by several variables, including:

The Company incurred a decrease in stock-based compensation of $250,800 for the three months ended December 31, 2009, compared to the three months ended December 31, 2008. The decrease can be attributed to the grant of 6,500,000 incentive stock options in Q4 2009, compared to 10,900,000 incentive stock options issued in Q4 2008. The incentive stock options issued vest in accordance with the stock option plan. The following is a list of incentive stock options issued in Q4 2009:

Number of Stock Options Issued	Exercise Price ($)	Expiry date
4,500,000 (a)(b)	0.10	December 21, 2014
2,000,000 (a)(b)	0.10	December 21, 2014



www.spiderresources.com	Page 24

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

6,500,000

The following is a list of incentive stock options issued in Q4 2008:

Number of Stock Options Issued	Exercise Price ($)	Expiry date
10,900,000 (a)(b)	0.10	October 2, 2013
10,900,000

	(a)	Refer to additional disclosure regarding incentive stock options below for a break-down of the incentive stock options granted; and
	(b)	Refer to “Twelve months ended December 31, 2009, compared with twelve months ended December 31, 2008” under “Results of Operations”, above.

	·	Professional fees during the three months ended December 31, 2009, were $54,641 (three months ended December 31, 2008 - $60,000). The decrease of $5,359 resulted from a decrease in services provided by legal counsel in relation to decreased corporate activity during the three months ended December 31, 2009, compared to the corresponding period in 2008.

	·	The increase of $61,400 in consulting fees during the three months ended December 31, 2009, over the comparative period in 2008 resulted from bonuses paid to consultants in accordance with agreements and board approval. No bonuses were granted in the comparative period in Q4 2008.

	·	The $68,982 decrease in general and administration expenses for the three months ended December 31, 2009, over the comparative period in 2008 is a direct result from a decrease in Part XII.6 tax (Canada) on the Company’s flow-through obligation in Q4 2009 compared to Q4 2008.

	·	Advertising and promotion expense increased by $21,063 during the three months ended December 31, 2009, over the comparative period in 2008 as a result of the Company expensing its share of the Air Canada Suite License Fee over the expected term of the license, website development and maintenance, investor relation expenditures and increased corporate activity.

	·	The increase in travel expense of $4,674 during the three months ended December 31, 2009, over the comparative period in 2008 is a result of key management personnel being required to attend various meetings during the period.

	·	The increase in operator’s fee is of $250,943 is a result of a 5% operator cost based on the total invoiced expenditures on the Big Daddy chromite deposit, which was billed at year end. Spider earned a total of $250,943 as the operator of the Big Daddy chromite deposit.

	·	The increase in future tax recovery of $165,912 is a result of differences recognized between the accounting cost and tax cost of the Company’s assets.

	·	Other expense fluctuations can be related to small variances seen in accounting and corporate services, management fees, transfer agent, listing and filing fees, occupancy costs, interest and bank charges and insurance.



www.spiderresources.com	Page 25

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

LIQUIDITY AND CAPITAL RESOURCES

The activities of the Company, principally the acquisition and exploration of properties that have the potential to contain metals, are financed through the completion of equity transactions such as equity offerings and the exercise of incentive stock options, agent options and warrants. For the twelve months ended December 31, 2009, the Company had the following equity transactions:

	·	On July 24, 2009, Spider completed the first tranche of a private placement of 48,333,333 flow-through units at a price of $0.03 per unit, for gross proceeds of $1,450,000. The private placement is part of a larger offering of up to 73,333,333 flow-through units. Each unit consists of one common share (issued on a flow-through basis) and one-half of one common share purchase warrant. Each full warrant entitles the holder to acquire one common share (which share shall not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue and thereafter at a price of $0.10 for a period of two years from the date of issue. Spider engaged IBK Capital Corp. to complete the first tranche of the offering on a best-efforts agency basis.

		Spider paid an aggregate cash commission in the amount of $102,375 to IBK and its selling group agents and issued 4,550,000 broker warrants entitling IBK and its selling group agents to purchase up to 4,550,000 common shares in the capital of Spider at a price of $0.03 for a period of one year from the date of issue and thereafter at a price of $0.06 for a period of two years from the date of issue. IBK engaged the following sub-agents in connection with the completion of the first tranche of the offering: Brant Securities Limited, Octagon Capital Corp., CIBC Wood Gundy, TD Waterhouse Canada Inc., MGI Securities Inc., and Dundee Securities Corporation.

	·	On August 7, 2009, Spider completed the second tranche of a private placement with the MineralFields Group of 25,000,000 flow-through units at a price of $0.03 per unit, for gross proceeds of $750,000. Each unit consisted of one common share (issued on a flow-through basis) and one-half of one common share purchase warrant. Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue and thereafter at a price of $0.10 for a period of two years from the date of issue.

		Spider engaged Limited Market Dealer Inc. to complete the second tranche of the offering on a best-efforts agency basis. Limited Market Dealer Inc. was paid an aggregate cash commission of $37,500 and was issued 2,500,000 broker compensation options ("Agent Options"). Each agent option is exercisable for one unit (“option unit”) at a price of $0.03 for a period of one year from the date of issue and thereafter at a price of $0.06 for a period of two years from the date of issue. Each option unit consists of one common share and one-half of one common share purchase warrant. Each full warrant will be exercisable for one common share at a price of $0.05 until August 7, 2010, and thereafter at a price of $0.10 until August 7, 2011.

	·	On December 24, 2009, Spider completed the first tranche of a private placement of 22,887,999 flow-through units at a price of $0.06 per unit, for gross proceeds of $1,373,280. The private placement is part of a larger offering of up to 50,000,000 flow-through units at a price of $0.06 per unit and up to 40,000,000 non flow-through units at the price of $0.05 per unit. Each flow-through unit consists of one common share (issued on a flow-through basis) and one non flow-through common share purchase warrant. Each full warrant entitles the holder to acquire one common



www.spiderresources.com	Page 26

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

		share (which share will not be issued on a flow-through basis) at a price of $0.10 for a period of two years from the date of issue.

	·	On December 30, 2009, Spider completed a second tranche of a private placement of 15,785,332 flow-through units at a price of $0.06 per unit, for gross proceeds of $947,120. Each unit consisted of one common share (issued on a flow-through basis) and one common share purchase warrant. Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.10 for a period of two years from the date of issue.

		Spider engaged Sandfire Securities Inc. ("SSI") to complete the offering. Spider paid an aggregate cash commission in the amount of $132,457 to SSI and its selling group agents and issued 3,620,163 non-transferable compensation options ("Agents Options") entitling SSI and its selling group agents to purchase up to 3,620,163 units at a price of $0.06 per unit for a period of two years from the date of issue. Each unit consisted of one common share and one common share purchase warrant exercisable to acquire one common share at the price of $0.10 per share for a period of two years from the date of issue of the agent options. The Company issued two tranches of agent options: (i) 2,083,298 units at a price of $0.06 which expire on December 24, 2011. The attached warrants to these agent options also expire on December 24, 2011; and (ii) 1,536,865 units at a price of $0.06 that expire on December 30, 2011. The attached warrants to these agent options also expire on December 30, 2011.

	·	The Company also raised funds from the exercise of warrants for cash proceeds of $5,100.

There is no assurance that future equity capital will be available to the Company in the amounts or at the times desired or on terms that are acceptable to the Company, if at all. See “Risks and Uncertainties” below.

The Company has no operating revenues and therefore must utilize its current cash reserves, funds obtained from the exercise of warrants, incentive stock options, agent options, and other financing transactions to maintain its capacity to meet ongoing discretionary and committed exploration and operating activities.

As of December 31, 2009, the Company had 428,388,431 common shares issued and outstanding, 116,756,658 warrants outstanding which would raise $9,535,733 if exercised in full, and 37,005,181 incentive stock options and agent options outstanding which would raise $3,380,712 if exercised in full.

To date, the cash resources of Spider are held with HSBC Bank Canada. The Company has no debt and its credit and interest rate risk is minimal. Accounts payable and accrued liabilities are short-term and non-interest bearing.

The Company’s liquidity risk with financial instruments is minimal as excess cash is invested in investment grade short-term deposit certificates. As of December 31, 2009, the Company’s funds were in two non-interest bearing accounts. The Company did not have any investments as of December 31, 2009.

In addition, sundry receivables are composed of sales tax receivable from government authorities in Canada and deposits held with service providers.



www.spiderresources.com	Page 27

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Accounts payable and accrued liabilities increased to $334,164 at December 31, 2009, compared to $166,081 at December 31, 2008, primarily due to the Company’s activities on the Big Daddy chromite deposit. The Company’s cash at December 31, 2009, is sufficient to pay these liabilities.

The Company’s use of cash at present occurs, and in the future will occur, principally in two areas, namely, funding of its general and administrative expenditures and funding of its investment activities. Those investing activities include the cash components of the cost of acquiring and exploring its mineral claims. Currently, the Company’s operating expenses are averaging approximately $100,000 per month for working capital related expenses. The Company also plans to incur exploration expenditures of $2,700,000 on its mining interests. Of this, $2,500,000 relates to the Big Daddy chromite deposit and must be spent by March 31, 2011; about $200,000 relates to other mining interests, and which the Company anticipates spending by December 31, 2010. See “Mineral Exploration Properties”, above. The Company’s existing funds on hand at December 31, 2009, and the private placement of $1,754,900, net of share issue costs, that closed on January 22, 2010, is anticipated to be adequate for Spider to meet its operating costs for fiscal 2010 and its exploration programs at current operating levels. This is subject to the Company’s ability to attract and retain skilled staff and consultants. The Company’s anticipated spending includes its December 31, 2009, flow-through commitment of approximately $2,320,000 and $380,000 from the January 22, 2010, flow-through financing, leaving a balance of $209,000 to be spent from the total flow-through financing of approximately $589,000. The December 31, 2009, flow-through commitment is required to be spent by December 31, 2010, under the Canadian tax rules regarding flow-through shares. The Company can elect to spend the January 22, 2010, flow-through financing by December 31, 2011, under the same tax rules. The decision where to spend the remaining $209,000 flow-through commitment from the January 22, 2010, flow-through financing will be determined in the coming year.

A summary of the Company’s Big Daddy chromite deposit exploration program is summarized below:

Details	Actual Costs ($)	Budget ($)	Over (Under) ($)

Other 2009 Programs	630,315	630,315	nil
Administration	49,613	35,200	14,413
Planning	67,783	49,421	18,362
Camp operations	219,283	163,483	55,800
Drafting	28,161	8,800	19,361
Fuel MOB	91,911	113,798	(21,887)
Line Cutting	55,552	57,714	(2,162)
Ground Geophysics	198,291	116,161	82,130
Geology	1,253,378	1,390,338	(136,960)
Drilling	2,298,932	2,361,537	(62,605)
Survey	38,018	126,908	(88,890)
Resource Studies	87,619	52,250	35,369
Environmental	nil	143,409	(143,409)
Total	5,018,856	5,249,334	(230,478)
Contingency	nil	450,666	(450,666)



www.spiderresources.com	Page 28

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Grand Total	5,018,856	5,700,000	(681,144)
Spider’s share	2,509,428	2,850,000	(340,572)

In mid–September the Company in its capacity as operator of this project commenced drilling on the Big Daddy chromite deposit. It is anticipated that the drill program will include up to 11,000 metres of core drilling and will cost between $5 million and $6 million, thus meeting the next level earn-in on the project from Freewest. The cost of the program will be shared equally between the Company and KWG.

OFF-BALANCE-SHEET ARRANGEMENTS

As of the date of this filing, the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity and capital resources.

PROPOSED TRANSACTIONS

There are no proposed transactions of a material nature being considered by the Company. However, the Company continues to evaluate properties and corporate entities that it may acquire in the future. See “Overall Objective” above

TRANSACTIONS WITH RELATED PARTIES

During the year, the Company paid $96,000 (2008 - $96,000) to Nominex Ltd., a company controlled by Neil Novak, the President and director of the Company, for geological and other services. Included in accounts payable and accrued liabilities is $8,400 (2008 - $8,400) owing to Nominex for management services provided.

The Company paid Richard Hamelin, the Vice President of the Company, fees totaling $72,000 for the year ended December 31, 2009 (2008 - $60,000). In addition, for the year ended December 31, 2009, legal fees in the amount of $343,540 (2008 - $94,916) were paid to a law firm in which the Corporate Secretary, Carmen Diges, is a partner. As at December 31, 2009, this law firm was owed $205,496 (2008 - $15,000) and this amount was included in accounts payable and accrued liabilities.

During the year, the Company paid $30,000 (2008 - $20,000) to Marrelli CFO Outsource Syndicate Inc. ("Marrelli") for the services of the Chief Financial Officer of the Company. The Company's Chief Financial Officer is the president of Marrelli and Marrelli Support Services Inc., a firm that provides accounting services to Spider. During the year, Spider expensed $43,608 (2008 - $70,442) for services rendered by this firm. In addition, as at December 31, 2009, this firm was owed $15,860 (December 31, 2008 - $2,680) and this amount was included in accounts payable and accrued liabilities.

At the year-end, the Company paid consulting fees of $66,582 (December 31, 2008 - $nil) to James G. Burns, an officer of the Company. As at December 31, 2009, this officer was owed $6,719 (December 31, 2008 - $nil) and this amount was included in accounts payable and accrued liabilities.

During the year, the Company paid consulting fees of $23,600 (December 31, 2008 - $22,016) to Franklin Geosciences Ltd., a company beneficially owned by Jim Franklin, a director of the Company. As at December 31, 2009, Franklin Geosciences Ltd. was owed $24,780 (December 31, 2008 - $nil) in



www.spiderresources.com	Page 29

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

outstanding consulting fees and unreimbursed expenses. This amount was included in accounts payable and accrued liabilities.

The Company paid bonuses of $119,700 to officers of the Company (Neil Novak $57,600, James G. Burns $22,500 and Richard Hamelin $39,600) (December 31, 2008 - $nil). In addition, during the year the Company paid $56,000 (December 31, 2008 - $39,000) as director fees. Director fees include payments to Earl Coleman - $13,500; Norman Brewster - $12,500; Bryan Wilson $8,500; Jim Franklin $10,000; and Gregory Roberts - $11,500) (December 31, 2008: Earl Coleman - $9,000; Norman Brewster - $8,500; Bryan Wilson $7,000; Jim Franklin; $7,500; and Gregory Roberts - $7,000). As at December 31, 2009, $5,856 (December 31, 2008 - $nil) was owed to Neil Novak as reimbursable expenses and this amount was included in accounts payable and accrued liabilities.

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s audited financial statements requires management to make certain estimates that affect the amounts reported in the financial statements. The accounting estimates considered significant are the valuation of the Company’s mining interests and stock-based compensation.

The policy of capitalizing exploration costs to date does not necessarily relate to the future economic value of the exploration properties. The valuation of mining interests is dependent entirely upon the discovery of economic mineral deposits.

The Company uses the Black-Scholes model to determine the fair value of stock options. The main factor affecting the estimates of stock-based compensation is the stock price volatility used. The Company uses historical price data and comparables in the estimate of future volatility.

Changes in the accounting estimates in the items discussed above may have a material impact on the financial position of the Company.

Other items requiring estimates for the year ended December 31, 2009, are accounts payable and accrued liabilities and asset retirement obligation. Changes in the accounting estimates in these items may have a material impact on the financial position of the Company.

CHANGES IN ACCOUNTING POLICIES

During the year ended December 31, 2009, the Company adopted the following new accounting policies:

Goodwill and Intangible Assets

In February 2008, the CICA approved Handbook Section 3064, “Goodwill and Intangible Assets”, which replaces the existing Handbook Sections 3062, “Goodwill and Other Intangible Assets” and 3450 “Research and Development Costs”. This standard is effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2009, with earlier application encouraged. The standard provides guidance on the recognition, measurement and disclosure requirements for goodwill and



www.spiderresources.com	Page 30

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

intangible assets. The adoption of this standard had no impact on the Company's operating results or financial position.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

In January 2009, the CICA approved EIC 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. This guidance clarified that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance is applicable to fiscal periods ending on or after January 20, 2009. The Company is continually evaluating the effects of this standard.

Mining exploration costs

On March 27, 2009, the CICA approved EIC 174, “Mining Exploration Costs”. This provides guidance on capitalization of exploration costs related to mining properties in particular, and on impairment of long-lived assets in general. The Company has applied this new abstract for the year ended December 31, 2008, and there was no significant impact on its financial statements as a result.

Categories of financial assets and liabilities

In June 2009, the Canadian Accounting Standards Board issued an amendment to CICA Section 3862, “Financial Instruments – Disclosures” in an effort to make Section 3862 consistent with International Financial Reporting Standards Section 7 – Disclosures (“IFRS 7”). The purpose was to establish a framework for measuring fair value in GAAP and expand disclosures about fair value measurements. To make the disclosures an entity is to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy is to have the following levels: (Level 1) quoted prices (unadjusted) in active markets for identical assets or liabilities; (Level 2) inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and (Level 3) inputs for the asset or liability that are not based on observable market data (unobservable inputs). These standards

apply to interim and annual consolidated financial statements relating to fiscal years ending after September 30, 2009.

Fair value measurement of assets and liabilities recognized on the balance sheet are categorized into levels within a fair value hierarchy based on the nature of valuation inputs. The Company's cash is classified in Level 1 within the fair value hierarchy as at December 31, 2009.

Future accounting changes

International Financial Reporting Standards (“IFRS”)

The Canadian Accounting Standards Board has confirmed that IFRS will replace current Canadian GAAP for publicly accountable enterprises, including the Company, effective for fiscal years beginning on or after January 1, 2011.

Accordingly, the Company will report interim and annual financial statements in accordance with IFRS beginning with the quarter ended March 31, 2011. The Company's 2011 interim and annual financial statements will include comparative 2010 financial statements, adjusted to comply with IFRS.



www.spiderresources.com	Page 31

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

IFRS Transition Plan

The Company has established a comprehensive IFRS transition plan and engaged third-party advisers to assist with the planning and implementation of its transition to IFRS. The following summarizes the Company's progress and expectations with respect to its IFRS transition plan:

Initial scoping and analysis of key areas for which accounting policies may be impacted by the transition to IFRS.	Complete.
Detailed evaluation of potential changes required to accounting policies, information systems and business processes, including the application of IFRS 1 First-time Adoption of International Financial Reporting Standards.	Complete.
Final determination of changes to accounting policies and choices to be made with respect to first-time adoption alternatives.	In progress, completion expected during Q2 2010
Resolution of the accounting policy change implications on information technology, business processes and contractual arrangements.	In progress, completion expected during Q3 2010
Quantification of the financial statement impact of changes in accounting policies.	Throughout 2010
Management and employee education and training.	Throughout the transition process

Impact of Adopting IFRS on the Company’s Business

As part of its analysis of potential changes to significant accounting policies, the Company is assessing what changes may be required to its accounting systems and business processes. The Company believes that the changes identified to date are minimal and the systems and processes can accommodate the necessary changes.

To date, the Company has not identified any contractual arrangements that may be affected by potential changes to significant accounting policies.

The Company's staff and advisers involved in the preparation of the financial statements are being trained on the relevant aspects of IFRS and the anticipated changes to accounting policies. Employees of the Company who will be affected by a change to business processes as a result of the conversion to IFRS will also be trained as necessary.



www.spiderresources.com	Page 32

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

The Board of Directors and the Audit Committee have been regularly updated on the progress of the IFRS conversion plan, and made aware of the evaluation to date of the key aspects of IFRS affecting the Company.

First-time adoption of IFRS

The adoption of IFRS requires the application of IFRS 1 First-time Adoption of International Financial Reporting Standards (“IFRS 1”), which provides guidance for an entity’s initial adoption of IFRS. IFRS 1 generally requires retrospective application of IFRS, effective at the end of its first annual IFRS reporting period. However, IFRS 1 also provides certain optional exemptions and mandatory exceptions to this retrospective treatment.

The Company has identified the following optional exemptions that it expects apply in its preparation of an opening IFRS statement of financial position as at January 1, 2010, its transition date:

	·	To apply IFRS 2 Share-based Payments only to equity instruments issued after November 7, 2002, and that had not vested by the transition date.
	·	To apply IFRS 3 Business Combinations prospectively from the transition date, therefore not restating business combinations that took place prior to the transition date.
	·	To apply the transition provisions of IFRIC 14 Determining whether an Arrangement Contains a Lease, therefore determining if arrangements existing at the transition date contain a lease based on the circumstances existing at that date.
	·	To apply IAS 23 Borrowing Costs prospectively from the transition date. IAS 23 requires the capitalization of borrowing costs directly attributable to the acquisition, production or construction of certain assets.

Prior to reporting interim financial statements in accordance with IFRS for the quarter ending March 31, 2011, the Company may decide to apply other optional exemptions contained in IFRS 1.

IFRS 1 does not permit changes to estimates that have been made previously. Accordingly, estimates used in the preparation of the Company’s opening IFRS statement of financial position as at the transition date will be consistent with those made under current Canadian GAAP. If necessary, estimates will be adjusted to reflect any difference in accounting policy.

Impact of Adopting IFRS on the Company’s Financial Statements

The adoption of IFRS will result in some changes to the Company's accounting policies that are applied in the recognition, measurement and disclosure of balances and transactions in its financial statements.

The following provides a summary of the Company's evaluation to date of potential changes to accounting policies in key areas based on the current standards and guidance within IFRS. This is not intended to be a complete list of areas where the adoption of IFRS will require a change in accounting policies, but to highlight the areas the Company has identified as having the most potential for a significant change. The International Accounting Standards Board has a number of ongoing projects, the outcome of which may have an effect on the changes required to the Company’s accounting policies on adoption of IFRS. At the present time, however, the Company is not aware of any significant expected changes prior to its adoption of IFRS that would affect the summary provided below.



www.spiderresources.com	Page 33

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

1)	Exploration and Evaluation Expenditures

	Subject to certain conditions, IFRS currently allows an entity to determine an accounting policy that specifies the treatment of costs related to the exploration for and evaluation of mineral properties. The Company expects to establish an accounting policy to expense, as incurred, all costs relating to exploration and evaluation until such time as it has been determined that a property has economically recoverable reserves.

	The application of this policy on the adoption of IFRS will have a significant impact on the Company’s financial statements. On adoption of IFRS, the carrying value of the mineral resource properties will be reduced to zero (as at the transition date), with a corresponding adjustment to accumulated deficit. All subsequent exploration and evaluation costs will be expensed as incurred until such time as it has been determined that a property has economically recoverable reserves.

2)	Impairment of (Non-financial) Assets

	IFRS requires a write down of assets if the higher of the fair market value and the value in use of a group of assets is less than its carrying value. Value in use is determined using discounted estimated future cash flows. Current Canadian GAAP requires a write down to estimated fair value only if the undiscounted estimated future cash flows of a group of assets are less than its carrying value.

	The Company's accounting policies related to impairment of non-financial assets will be changed to reflect these differences. However, the Company does not expect that this change will have an immediate impact on the carrying value of its assets. The Company will perform impairment assessments in accordance with IFRS at the transition date.

3)	Share-based Payments

	In certain circumstances, IFRS requires a different measurement of stock-based compensation related to stock options than current Canadian GAAP.

	The Company does not expect any changes to its accounting policies related to share-based payments that would result in a significant change to line items within its financial statements.

4)	Asset Retirement Obligations (Decommissioning Liabilities)

	IFRS requires the recognition of a decommissioning liability for legal or constructive obligations, while current Canadian GAAP only requires the recognition of such liabilities for legal obligations. A constructive obligation exists when an entity has created reasonable expectations that it will take certain actions.

	The Company's accounting policies related to decommissioning liabilities will be changed to reflect these differences. However, the Company does not expect this change will have an immediate impact on the carrying value of its assets.



www.spiderresources.com	Page 34

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

5)	Property and Equipment

	IFRS contains different guidance related to recognition and measurement of property and equipment than current Canadian GAAP.

	The Company does not expect any changes to its accounting policies related to property and equipment that would result in a significant change to line items within its financial statements.

6)	Income Taxes

	In certain circumstances, IFRS contains different requirements related to recognition and measurement of future (deferred) income taxes.

	The Company does not expect any changes to its accounting policies related to income taxes that would result in a significant change to line items within its financial statements.

Subsequent Disclosures

Further disclosures of the IFRS transition process are expected as follows:

The Company’s MD&A for the 2010 interim periods and the year ended December 31, 2010, will include updates on the progress of the transition plan, and, to the extent known, further information regarding the impact of adopting IFRS on key line items in the annual financial statements.

The Company's first financial statements prepared in accordance with IFRS will be the interim financial statements for the three months ending March 31, 2011, which will include notes disclosing transitional information and disclosure of new accounting policies under IFRS. The interim financial statements for the three months ending March 31, 2011, will also include 2010 financial statements for the comparative period adjusted to comply with IFRS, and the Company’s transition date IFRS statement of financial position (at January 1, 2010).

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

The CICA issued three new accounting standards in January 2009: Section 1582, "Business Combinations", Section 1601, "Consolidated Financial Statements" and Section 1602, "Non-Controlling interests". These new standards will be effective for fiscal years beginning on or after January 1, 2011. Section 1582 replaces section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to IFRS 3 - Business Combinations. Sections 1601 and 1602 together replace section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS lAS 27 - Consolidated and Separate Financial Statements. The Company is in the process of evaluating the requirements of the new standards.

MANAGEMENT OF CAPITAL

The Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and development of mineral properties.



www.spiderresources.com	Page 35

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

The Company considers its capital to be equity, which comprises share capital, warrants, stock options, contributed surplus, and deficit, which at December 31, 2009, totaled $22,765,854 (2008 - $19,413,635).

The Company manages its capital structure in a manner that provides sufficient funding for acquisition, exploration and development of mineral properties. Funds are primarily secured through equity capital raised by way of private placements. There can be no assurance that the Company will be able to continue raising equity capital in this manner.

The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company's approach to capital management during the year ended December 31, 2009. The Company is not subject to externally imposed capital requirements.

PROPERTY RISK AND FINANCIAL RISK AFFECTING FINANCIAL INSTRUMENTS

(a) Property risk

The Company's mining interests are the only properties that are currently material to it. Unless the Company acquires or develops additional material properties, the Company will be solely dependent upon its current mining interests. If the Company acquires no additional mineral properties, any adverse development affecting its mining interests would have a material adverse effect on its financial condition and results of operations.

(b) Financial risk

The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign exchange rate and commodity and equity price risk).

The Company’s management team carries out risk management with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.

Credit risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to sundry receivables. The Company has no significant concentration of credit risk arising from operations. Financial instruments included in sundry receivables consist of sales tax receivable from government authorities in Canada and deposits held with service providers. Sundry receivables are in good standing as of December 31, 2009. Management believes that the credit risk concentration with respect to financial instruments is minimal.



www.spiderresources.com	Page 36

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Liquidity risk

Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations when they become due, or can only do so at excessive cost. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2009, the Company had a cash balance of $2,716,778 (2008 - $3,205,855) to settle current liabilities of $334,164 (2008 - $166,081). All of the Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. The Company is also committed to spending approximately $2,320,000 in exploration expenditures by December 31, 2010. If the Company does not spend these funds in compliance with the government of Canada flow-through regulations, it may be subject to litigation from various counterparties. The Company intends to fulfill all flow-through commitments within the given time constraints.

Market risk

(i) Interest rate risk

Interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. The Company has cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its banks.

(ii) Foreign currency risk

Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using cash flow forecasting. The Company's functional and reporting currency is the Canadian dollar and major purchases are transacted in Canadian dollars. As a result, the Company's exposure to foreign currency risk is minimal.

(iii) Price risk

The Company is exposed to price risk with respect to commodity price. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices to determine its appropriate course of action.

Sensitivity analysis

Sundry receivable, which are classified for accounting purposes as loans and receivables, are measured at amortized cost. Accounts payable and accrued liabilities are classified for accounting purposes as other financial liabilities, which are measured at amortized cost. Due to the short-term nature of these instruments, their carrying value approximates fair value.

Fair value represents the amount that would be exchanged in an arm's length transaction between willing parties and is best evidenced by a quoted market price, if one exists.

Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability depends upon the world market price of valuable minerals. Commodity prices



www.spiderresources.com	Page 37

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

have fluctuated significantly in recent years. There is no assurance that, even if commercial quantities of valuable minerals are produced in the future, a profitable market will exist for them. As of December 31, 2009, the Company was not a producer of valuable minerals. Even so, commodity price risk may affect the completion of future equity transactions such as equity offerings and the exercise of incentive stock options and warrants. This may also affect the Company's liquidity and its ability to meet its ongoing obligations.

DISCLOSURE OF INTERNAL CONTROLS

Management has established processes to provide them sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the audited financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the audited financial statements; and (ii) the audited financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented.

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:

i)	controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii)	a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE

The following table sets forth a breakdown of material components of mining interests for the years ended December 31, 2009 and December 31, 2008.



www.spiderresources.com	Page 38

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Exploration expenditures

Projects	December 31, 2009 ($)	December 31, 2008 ($)
Spider #1
Opening balance	7,379,737	7,374,737

Geophysics	nil	5,000

Closing balance	7,379,737	7,379,737
Wawa
Opening balance	1,133,232	912,438

Contractor wages	4,440	157,220
Geochemical	74,735	nil
Operator costs	7,979	15,605
License fees	18,120	26,520
Travel, meals and accommodation	264	4,797
Geophysics	nil	16,652

Closing balance	1,238,770	1,133,232
McFaulds Lake
Opening balance	5,999,624	5,879,811

Operator costs	129,684	3,747
Drilling costs	nil	102,000
Reversal of fees previously accrued for consulting services	nil	(77,353)
Consulting	nil	26,904
Valuation report	nil	11,735
Claims staking and maintenance	nil	26,229
Travel, accommodation and meals	2,865	1,681
Geochemical	nil	287
Other	nil	795
Geology	nil	5,745
Gemcom software	nil	2,818



www.spiderresources.com	Page 39

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Labour	nil	2,395
Transportation	nil	114
Administration	nil	6,047
Rental	nil	1,669
First Nations	nil	5,000
Camp/lodging/meals/travel	44,357	nil

Closing balance	6,176,530	5,999,624
Diagnos
Opening balance	66,919	50,319

Geophysics	nil	16,600

Closing balance	66,919	66,919
Big Daddy Chromite Deposit
Opening balance	1,769,913	122,146

Drilling	1,106,381	921,426
Claims staking	nil	62,295
Geochemical	37,161	36,504
Meals and lodging	124,612	93,279
Operator costs	528,245	116,606
Travel and fuel	43,424	47,997
Contractor wages	881,758	64,958
Survey	17,583	86,799
Geophysics	116,695	217,903

Closing balance	4,625,772	1,769,913

Total	19,487,728	16,349,425

Acquisition costs

Projects	December 31, 2009 ($)	December 31, 2008 ($)
Spider #1
Opening balance	1,983,760	1,983,760



www.spiderresources.com	Page 40

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009


No activity	nil	nil

Closing balance	1,983,760	1,983,760
Wawa
Opening balance	466,173	466,173

No activity	nil	nil

Closing balance	466,173	466,173
McFaulds Lake
Opening balance	nil	nil

No activity	nil	nil

Closing balance	nil	nil
Diagnos
Opening balance	39	39

No activity	nil	nil

Closing balance	39	39
Big Daddy Chromite Deposit
Opening balance	34,000	34,000

No activity	nil	nil

Closing balance	34,000	34,000

Total	2,483,972	2,483,972



www.spiderresources.com	Page 41

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

The following table sets forth a breakdown of material components of administrative expenses of the Company for the years ended December 31, 2009 and December 31, 2008.

Administrative Expenses	Year Ended
	December 31, 2009	December 31, 2008
	($)	($)
Accounting, tax and corporate services	64,845	80,372
Shareholder relations	95,910	83,319
Professional fees	219,502	99,732
Management fees	96,000	96,469
Transfer agent, listing and filing fees	34,469	23,493
General and administration	104,527	111,375
Travel	66,833	25,967
Occupancy costs	20,048	13,750
Interest and bank charges	2,056	533
Advertising and promotion	169,545	54,792
Consulting fees	292,283	122,000
Insurance	32,121	21,510
Capital tax	-	(14,164)
Totals	1,198,139	719,168

DISCLOSURE OF OUTSTANDING SHARE DATA

As of the date of this MD&A, Spider had 471,194,433 common shares issued and outstanding.

As of the date of this MD&A, Spider had the following incentive stock options and agent options outstanding:

Number of Options and Agent Options	Exercise Price	Expiry Date

5,385,018	$0.10	February 8, 2011
1,000,000	$0.10	July 25, 2011
(1)2,500,000	$0.03 -$0.06	August 7, 2011
(2)2,083,298	$0.06	December 24, 2011
(2)1,536,865	$0.06	December 30, 2011
(3)982,334	$0.06	January 22, 2012
(3)2,331,000	$0.05	January 22, 2012
10,900,000	$0.10	October 2, 2013
7,100,000	$0.10	April 21, 2014
4,500,000	$0.10	December 21, 2014
2,000,000	$0.10	December 21, 2014
40,318,515



www.spiderresources.com	Page 42

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	(1)	Each broker option is exercisable for one unit at a price of $0.03 for a period of one year from the date of issue and thereafter at a price of $0.06 for a period of two years from the date of issue. Each broker unit consists of one common share and one-half of one common share purchase warrant. Each full warrant will be exercisable for one common share at a price of $0.05 until August 7, 2010, and thereafter at a price of $0.10 until August 7, 2011.
	(2)	3,620,163 non-transferable agent options entitling the holders to purchase up to 3,620,163 units at a price of $0.06 per unit for a period of two years from the date of issue. Each unit consist of one common share and one common share purchase warrant exercisable to acquire one common share at the price of $0.10 per share for a period of two years from the date of issue of the agent options. The Company issued two tranches of agent options: (i) 2,083,298 units at a price of $0.06 that expire on December 24, 2011. The attached warrants to these options also expire on December 24, 2011; and (ii) 1,536,865 units at a price of $0.06 that expire on December 30, 2011. The attached warrants to these agent options also expire on December 30, 2011.
	(3)	3,313,334 units, of which 982,334 agent units are exercisable at an exercise price of $0.06 per agent unit and 2,331,000 agent units are exercisable at an exercise price of $0.05 per agent unit. Each agent unit consist of one common share and one common warrant exercisable to acquire one common share at an exercise price of $0.10 per share in a period of two years from the date of issue.

As of the date of this MD&A, Spider had the following warrants outstanding:

Number of Warrants	Exercise Price	Expiry Date

(4)29,555,666	$0.10	October 11, 2010
4,700,000	$0.10	November 27, 2010
470,000	$0.10	November 27, 2010
1,200,000	$0.10	December 30, 2010
(1) 18, 554,996	$0.05 - $0.10	July 24, 2011
(2)1,429,999	$0.03 - $0.06	July 28, 2011
(3)12,500,000	$0.05 - $0.10	August 7, 2011
22,887,999	$0.10	December 24, 2011
15,785,332	$0.10	December 30, 2011
33,133,336	$0.10	January 22, 2012

140,217,328

	(1)	Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue (July 24, 2010) and thereafter at a price of $0.10 for a period of two years from the date of issue (July 24, 2011).
	(2)	Each broker warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.03 for a period of one year from the date of issue (July 28, 2010) and thereafter at a price of $0.06 for a period of two years from the date of issue (July 28, 2011).



www.spiderresources.com	Page 43

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

	(3)	Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue (August 7, 2010) and thereafter at a price of $0.10 for a period of two years from the date of issue (August 7, 2011).
	(4)	The TSX Venture Exchange on October 9, 2009, agreed that Spider could amend the terms of the warrants as follows: (i) extend the term of the warrants by one year until October 11, 2010, and (ii) reduce the exercise price of the warrants from $0.175 per share to $0.10 per share.

RISKS AND UNCERTAINTIES

An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Only investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment should undertake such investment. Prospective investors should carefully consider the risk factors described below.

Additional Funding Requirements

There is no assurance that sufficient additional financing will be available to the Company on acceptable terms or at all. Failure to obtain such additional financing could result in a delay or the indefinite postponement of the Company’s projects.

Mineral Exploration and Exploitation

Mineral exploration and exploitation involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explosions, tailings impoundment failures, cave-ins, landslides and the inability to obtain adequate machinery, equipment or labour are some of the risks involved in mineral exploration and exploitation activities. The Company has relied on and may continue to rely on consultants and others for mineral exploration and exploitation expertise. Substantial expenditures are required to establish mineral reserves and resources through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of some properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining, or to upgrade existing infrastructure. There can be no assurance that the funds required to exploit any mineral reserves and resources discovered by the Company will be obtained on a timely basis or at all. The economics of exploiting mineral reserves and resources discovered by the Company are affected by many factors, some outside the control of the Company, including the cost of operations, variations in the grade of ore mined and metals recovered, price fluctuations in the metal markets, costs of processing equipment, and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. There can be no assurance that the Company’s mineral exploration and exploitation activities will be successful.

Uninsurable Risks

Mineral exploration and exploitation activities involve numerous risks, including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other environmental occurrences and political and social instability. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks as a result of high premiums or for other reasons. Should such liabilities arise, they could negatively



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Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

affect the Company’s profitability and financial position and the value of its common shares. The Company does not maintain insurance against environmental risks.

Environmental Regulation and Liability

The Company’s activities are subject to laws and regulations controlling not only mineral exploration and exploitation activities themselves but also the possible effects of such activities upon the environment. Environmental legislation may change and make the exploration for mineral resources uneconomic or result in significant environmental or reclamation costs. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mineral exploration activities, such as seepage fuel spills or seepage that could result in environmental pollution. A breach of environmental legislation may result in the imposition of fines and penalties or the suspension or closure of operations. In addition, certain types of operations require the submission of environmental impact statements and approval thereof by government authorities.

Regulations and Permits

The Company’s activities are subject to a wide variety of laws and regulations governing health and worker safety, employment standards, waste disposal, protection of the environment, protection of historic and archaeological sites, mine development and protection of endangered and protected species and other matters. The Company is required to have a wide variety of permits from governmental and regulatory authorities to carry out its activities. These permits relate to virtually every aspect of the Company’s exploration activities. Changes in these laws and regulations or changes in their enforcement or interpretation could result in changes in legal requirements or in the terms of the Company’s permits that could have a significant adverse impact on its existing or future operations or projects. Obtaining permits can be a complex, time-consuming process.

There can be no assurance that the Company will be able to obtain the necessary permits on acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining permits and complying with these permits and applicable laws and regulations could stop or materially delay or restrict the Company from continuing or proceeding with existing or future operations or projects. Any failure to comply with permits and applicable laws and regulations, even if inadvertent, could result in the interruption or closure of operations or material fines, penalties or other liabilities.

Dependence on Key Employees

The Company’s business and operations are dependent on retaining the services of a small number of key employees. The success of the Company is, and will continue to be, to a significant extent, dependent on the expertise and experience of these employees. The loss of one or more of these employees could have a material adverse effect on the Company. The Company does not maintain insurance on any of its key employees.

Potential Dilution

The issue of common shares of the Company upon the exercise of the options and warrants will dilute the ownership interest of the Company’s current shareholders. The Company may also issue additional options and warrants or additional common shares from time to time in the future. If it does so, the ownership interest of the Company’s then current shareholders could also be diluted.

Current Global Financial Conditions



www.spiderresources.com	Page 45

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Current global financial conditions have been characterized by increased volatility, and several financial institutions have either gone into bankruptcy or have been rescued by governmental authorities. Access to public financing has been made difficult by both the rapid decline in value of sub-prime mortgages and the liquidity crisis affecting the asset-backed commercial paper market. These factors may affect the ability of the Company to obtain equity or debt financing in the future on terms favourable to the Company or at all. In addition, general economic indicators, including employment levels, corporate earnings, economic growth and consumer confidence, have deteriorated. Any or all of these economic factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. If such increased levels of volatility and market turmoil continue, the Company’s operations could be hurt and the trading price of its common shares may be adversely affected.

Securities of mining and mineral exploration companies, including the common shares of the Company, have experienced substantial volatility in the past, and especially during the fourth quarter of 2008 and early 2009, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic developments in Canada and globally, and market perceptions of the attractiveness of particular industries. The price of the Company’s securities is also significantly affected by short-term changes in commodity prices, base and precious metal prices or other mineral prices, currency exchange fluctuations and the political environment in the countries in which the Company does business.

SUBSEQUENT EVENTS

On January 22, 2010, the Company completed the final tranche of its private placement in which an aggregate of 9,823,336 flow-through units, at a price of $0.06 per unit, and 23,310,000 non-flow-through units at price of $0.05 per unit, were issued to subscribers for aggregate proceeds of $1,754,900. Each flow-through unit consisted of one common share (issued on a flow-through basis) and one common share purchase warrant (non-flow-through). Each non-flow-through unit consisted of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.10 for a period of two years from date of issue. The final tranche was part of a larger offering of 48,496,667 flow-through units and 23,310,000 units, pursuant to which Spider raised aggregate gross proceeds of approximately $4.1 million.

In order to complete the final tranche of the private placement, Spider paid to SSI and its selling group as agent an aggregate cash commission in the amount of $140,392 and issued non-transferable compensation options to purchase up to 3,313,334 units for a period of two years from date of issue, of which 982,334 agent units are exercisable at an exercise price of $0.06 per agent unit and 2,331,000 agent units are exercisable at an exercise price of $0.05 per agent unit. Each agent unit consisted of one common share and one common share purchase warrant exercisable to acquire one common share at an exercise price of $0.10 per share for a period of two years from January 22, 2010.

The securities issued under the private placement are subject to a hold period from the date of issuance until May 23, 2010, in accordance with applicable securities laws and TSX Venture Exchange policies.

On January 12, 2010, a total of 2,500,000 warrants were exercised for 2,500,000 common shares of Spider at $0.05 per share for gross proceeds of $125,000.



www.spiderresources.com	Page 46

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

On March 16, 2010, total of 1,111,000 warrants were exercised for 1,111,000 common shares of Spider at $0.10 per share for gross proceeds of $111,100. In addition, a total of 200,000 warrants were exercised for 200,000 common shares of Spider at $0.05 per share for gross proceeds of $10,000.

On March 17, 2010, a total of 161,666 warrants were exercised for 161,666 common shares of Spider at $0.05 per share for gross proceeds of $8,083.

On March 18, 2010, a total of 1,500,000 warrants were exercised for 1,500,000 common shares of Spider at $0.05 per share for gross proceeds of $75,000. In addition, a total of 150,000 warrants were exercised for 150,000 common shares of Spider at $0.03 per share for gross proceeds of $4,500.

On March 19, 2010, a total of 2,800,001 warrants were exercised for 2,800,001 common shares of Spider at $0.03 per share for gross proceeds of $84,000. In addition, a total of 416,666 warrants were exercised for 416,666 common shares of Spider at $0.05 per share for gross proceeds of $20,833.

On March 22, 2010, a total of 833,333 warrants were exercised for 833,333 common shares of Spider at $0.05 per share for gross proceeds of $41,667.

ADDITIONAL DISCLOSURE REGARDING INCENTIVE STOCK OPTIONS

Fiscal 2009

Name of Optionee	Position of Optionee	No. of Optioned Shares	Exercise Price	Expiry Date
Norman E. Brewster	Director	750,000	$0.10	April 21, 2014
Neil D. Novak	Director & Officer	1,000,000	$0.10	April 21, 2014
Bryan H. Wilson	Director	750,000	$0.10	April 21, 2014
Earl S. Coleman	Director	750,000	$0.10	April 21, 2014
Richard Hamelin	Director & Officer	750,000	$0.10	April 21, 2014
Carmen Diges	Officer	250,000	$0.10	April 21, 2014
Gregory Roberts	Director	750,000	$0.10	April 21, 2014
James Franklin	Director	750,000	$0.10	April 21, 2014
Carmelo Marrelli	Officer	250,000	$0.10	April 21, 2014



www.spiderresources.com	Page 47

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

George Duguay	Consultant	250,000	$0.10	April 21, 2014
James Burns	Consultant	750,000	$0.10	April 21, 2014
Kathy Scott	Employee	100,000	$0.10	April 21, 2014
Total		7,100,000

Name of Optionee	Position of Optionee	No. of Optioned Shares	Exercise Price	Expiry Date
Neil D. Novak	Director & Officer	1,000,000	$0.10	December 21, 2014
Richard Hamelin	Director & Officer	600,000	$0.10	December 21, 2014
Earl S. Coleman	Director	400,000	$0.10	December 21, 2014
Norman E. Brewster	Director	400,000	$0.10	December 21, 2014
Bryan H. Wilson	Director	400,000	$0.10	December 21, 2014
Gregory Roberts	Director	400,000	$0.10	December 21, 2014
James Franklin	Director	400,000	$0.10	December 21, 2014
James Burns	Consultant	300,000	$0.10	December 21, 2014
Carmelo Marrelli	Officer	200,000	$0.10	December 21, 2014
Carmen Diges	Officer	200,000	$0.10	December 21, 2014
George Duguay	Consultant	200,000	$0.10	December 21, 2014
Investor Cubed Inc.	IR Consultant	2,000,000	$0.10	December 21, 2014
Total		6,500,000

Fiscal 2008

Name of

Optionee

Position of Optionee

No. of Optioned Shares

Exercise Price

Expiry Date



www.spiderresources.com	Page 48

Spider Resources Inc.
Management’s Discussion & Analysis
Dated – April 7, 2010	Year Ended December 31, 2009

Norman E. Brewster	Director	1,000,000	$0.10	October 2, 2013
Neil D. Novak	Director & Officer	2,000,000	$0.10	October 2, 2013
Bryan H. Wilson	Director	1,500,000	$0.10	October 2, 2013
Earl S. Coleman	Director	1,000,000	$0.10	October 2, 2013
Richard Hamelin	Director & Officer	1,500,000	$0.10	October 2, 2013
Gregory Roberts	Director	1,000,000	$0.10	October 2, 2013
James Franklin	Director	1,000,000	$0.10	October 2, 2013
Carmen Diges	Officer	200,000	$0.10	October 2, 2013
Carmelo Marrelli	Officer	500,000	$0.10	October 2, 2013
Kathy Scott	Employee	100,000	$0.10	October 2, 2013
Scott Hogg	Consultant	100,000	$0.10	October 2, 2013
Steve Munro	Consultant	100,000	$0.10	October 2, 2013
James Burns	Consultant	500,000	$0.10	October 2, 2013
George Duguay	Consultant	200,000	$0.10	October 2, 2013
Billiken Management Services Inc.	Consultant	200,000	$0.10	October 2, 2013
Total		10,900,000



www.spiderresources.com	Page 49

Spider Resources Inc.

Management’s Discussion and Analysis

Year Ended December 31, 2008

INTRODUCTION

The following management’s discussion and analysis (“MD&A”) of the financial condition and results of the operations of Spider Resources Inc. (“Spider” or “the Company”) constitutes management’s review of the factors that affected the Company’s financial and operating performance for the year ended December 31, 2008. This MD&A was written to comply with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations. This discussion should be read in conjunction with the audited annual financial statements of the Company for the year ended December 31, 2008, together with the notes thereto and the audited annual financial statements for the year ended December 31, 2007, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. The audited annual financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). In the opinion of management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results presented for the years ended December 31, 2008, and December 31, 2007, are not necessarily indicative of the results that may be expected for any future period. Information contained herein is presented as at April 9, 2009, unless otherwise indicated.

Further information about the Company and its operations can be obtained from the offices of the Company or from www.sedar.com.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Except for statements of historical fact relating to the Company, certain information contained in this MD&A constitutes “forward-looking information” under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the potential of the Company’s properties; the future prices of metals; success of exploration activities; cost and timing of future exploration and development; requirements for additional capital; and other statements relating to the financial and business prospects of the Company. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to, risks related to: unexpected events and delays during permitting; the possibility that future exploration results will not be consistent with the Company’s expectations; timing and availability of external financing on acceptable terms and in light of the current decline in global liquidity and credit availability; future prices of metals prices; currency exchange rates; government regulation of mining operations; failure of equipment or processes to operate as anticipated; risks inherent in metals exploration and development including environmental hazards, industrial accidents, unusual or unexpected geological formations; and uncertain political and economic environments. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

DESCRIPTION OF BUSINESS

The Company is an exploration enterprise and carries on business in one segment, being the exploration for valuable minerals, exclusively in Canada.

Spider's goal is to deliver superior returns to shareholders by concentrating on the acquisition of properties that have the potential to contain valuable minerals. The Company plans to focus on certain properties, as set out below under “Mineral Exploration Properties”.

OVERALL PERFORMANCE

Throughout most of 2008, and continuing into 2009, the global financial and commodity markets were characterized by extreme volatility and falling prices as market participants reacted and responded to growing uncertainty and pessimism over the depressed North American and international economies. These circumstances have had a significant impact on the Company’s operations and in particular, on the economics of its exploration activities and its ability to pursue growth opportunities. As a result, the Company has revised its committed exploration activities downwards. The Company expects to continue to explore its properties at a much reduced rate in order to preserve its cash resources. The Company’s immediate focus is to complete its flow-through commitment of $195,284 by December 31, 2009, while minimizing its operating costs. The Company also entered into an agreement with IBK Capital Corp. (“IBK”) on February 10, 2009, whereby IBK will endeavour to place up to 78,750,000 million common shares of Spider on a best efforts basis for gross proceeds of up to $4,725,000 by way of a private placement. The Company plans to use $2.7 million from the private placement to finance its discretionary exploration programs on its key projects, while the remaining funds raised would be used for working capital purposes.

The Company has sufficient cash on hand to fund its discretionary operating costs and flow-through commitment of $195,284 for fiscal 2009. The Company will require the private placement discussed above to be completed in order to meet its discretionary exploration program requirements for fiscal 2009. See “Liquidity and Financial Position” below.

The Company spent $2,009,974 during the year ended December 31, 2008, on exploration activities on its mineral properties. At December 31, 2008, the Company had mining interests valued at $18,833,397 compared to $16,823,423 as at December 31, 2007.

At December 31, 2008, the Company had working capital of $3,417,713 compared to $4,925,170 at December 31, 2007. The Company had cash of $3,205,855 at December 31, 2008, compared to $4,912,931 at December 31, 2007, a decrease of approximately 35%. The decrease in cash during the year ended December 31, 2008, is primarily due to cash expenditures for the Company’s exploration activities, discussed above, and operating costs.

- 2 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

See “Mineral Exploration Properties” below.

TRENDS

	·	The economic crisis that started in the financial sector has continued to worsen and we are now in the midst of a global recession. The mining industry is undergoing massive scaling down. Capital investment in mining has dramatically declined with major new projects cancelled or delayed. Producing properties are subject to shutdowns and reduced production. Credit markets have become increasingly difficult and many mining companies that, just one year ago, had large cash resources to invest in mining operations are now struggling to finance day-to-day operations;

	·	There are significant uncertainties regarding the price of metals, specifically copper, chromite and zinc, and the availability of equity financing for the purposes of mineral exploration and development. The price of metals, copper, chromite and zinc in particular, has fallen substantially over the past several months and financial markets have deteriorated to the point where it has become extremely difficult for companies to raise new capital;

	·	The Company’s future performance is largely tied to the outcome of future drilling results and the overall financial markets; and

	·	Current financial markets are likely to be volatile in Canada for the remainder of fiscal 2009 and potentially into 2010, reflecting ongoing concerns about the stability of the global economy and weakening global growth prospects. As well, concern about global growth has led to sustained drops in the commodity markets. Unprecedented uncertainty in the credit markets has also led to increased difficulties in borrowing/raising funds. Companies worldwide have been negatively affected by these trends. As a result, the Company may have difficulties raising equity financing for the purposes of mineral exploration and development, particularly without excessively diluting present shareholders of the Company.

See “Risk Factors” below.

MINERAL EXPLORATION PROPERTIES

Over the span of 14 years of exploration in the Province of Ontario, Spider has been exploring in a vast region of Northern Ontario, stretching from the coast of James Bay to the western reaches of the James Bay Lowlands, and also to the northeast of Lake Superior near the town of Wawa, Ontario. The Company is involved in three project areas in Ontario, known as “Spider #1”, “Spider #3” and “Wawa”. Of these areas, Spider’s focus remains on the Spider #3 area, which includes the property optioned by Spider and KWG Resources Inc. (“KWG”) from Freewest Resources Canada Inc., the Diagnos property, the McFaulds Lake property, currently under option to UC Resources Inc. (“UC”), which can earn up to a 55% interest in this property, and the Kyle property, optioned to Renforth Resources Ltd. (“Renforth”), which can earn up to 55% interest in the property.

The following table outlines Spider’s projects:

- 3 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Property	Claims	Hectares	JV details (potential interest)	Commodity sought

Freewest Option	7	1,280	JV with KWG and Freewest (Spider operator)	Chrome, nickel, PGMs
			Spider to earn 30%

Diagnos Initiative	22	3,696	JV with KWG (Spider operator)	Diamonds,
			Spider to maintain 50%	base and precious metals

McFaulds Project (W)	51	11,200	UC to earn in from Spider/KWG (UC operator)	Copper, zinc
			Spider to reduce to 30%
McFaulds Project (E)	73	17,088	UC to earn in on project	Copper, zinc
			Spider to reduce to 30%
McFaulds Project (N)	13	2,688	UC to earn in on project	Copper, zinc
			Spider to reduce to 30%

Kyle Project	8	2,048	Renforth to earn in 55% from Spider/KWG (Renforth operator)	Diamonds
			Spider to reduce to 30%
Renforth claims	15	3,616	Renforth option to reduce to 55%	Diamonds, base metals
			Spider to earn up to 30%

Wawa Project	45	4,500	JV with KWG (Spider operator)	Diamonds
			Spider to earn 66 2/3%

MacFadyen Project	5	672	JV with KWG (KWG operator)	Diamonds
			Spider to reduce to 33 1/3 %

- 4 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Spider #3 Project Area (includes McFaulds, Freewest and Diagnos properties)

Freewest Option Property

This property, located approximately 15 kms south-west of the McFaulds Lake VMS property, includes seven mineral claims constituting 78 claim units.

Under the terms of an agreement with Freewest (see press release December 19, 2005), Spider and KWG must spend an aggregate of $3 million on exploration over a four-year period to earn an initial joint 50% interest in the Freewest Option property. They may earn a cumulative joint 60% interest in the property by delivering a bankable feasibility study on any mineralization identified, and subsequently a cumulative joint 65% interest by arranging financing on behalf of Freewest to put the property into commercial production. At present, Spider and KWG have earned an initial 50% interest in the property by jointly expending a total of $3 million.

On March 7, 2006, Spider announced that it had completed a winter drilling program on the property with KWG and Freewest, and discovered a chrome-platinum-palladium bearing peridotite in hole FW-06-03. On June 29, 2006, it was announced that the two high-grade chromitite layers were confirmed yielding assays of 23.4% chrome (34.5% Cr2O3), 0.19 g/t platinum, 0.21 g/t palladium, 0.32 g/t ruthenium, 0.05 g/t rhodium and 0.12% nickel over 1.03 metres followed by 18.6% chrome (28.9% Cr2O3), 0.23 g/t platinum, 0.48 g/t palladium, 0.30 g/t ruthenium, 0.05 g/t rhodium and 0.13% nickel over 0.85 metres. The assaying completed on the entire mineralized zone in the layered peridotite, including the upper and lower chromitite layers, yielded 4.05% chrome and 0.17% nickel over a core length of 16.85 metres.

This new chrome-nickel-platinum group element discovery was the first of its kind the McFaulds Lake area of the Sachigo Greenstone Belt in northern Ontario.

Recent exploration results by Noront Resources Ltd. (“Noront”) on its nearby (3.6 kilometres to the southwest) Eagle One magmatic massive sulphide (MMS) occurrence renewed the interest in the nearby Freewest Option property. A similar geologic unit (as described above for the chrome occurrence) is the host for the Eagle One occurrence. However, the Noront occurrence has very significant nickel, copper, platinum, palladium and gold, while the Company’s occurrence contains appreciable chrome layers enriched in PGEs (platinum group elements) and nickel, formed in a peridotite magma chamber. Geological models for this type of occurrence suggest a positional relationship between MMS occurrences and the chromite layering observed in the Company’s occurrence. Consequently, the Company undertook an aggressive exploration program that started in late Q1 and continued through all of Q2 and Q3 2008. The project expenditures cost in the order of $3.4 million to year end. The cost of this program was shared equally with KWG. The field exploration program extended into the first part of Q4, by which time Spider and KWG had expended sufficient funds to meet the minimum earn-in requirement where each of Spider and KWG have earned a 25% respective interest from Freewest. On December 31, 2008, Spider and KWG received notice from Freewest that a 25% interest had been earned by each of KWG and Spider.

A diamond drilling program on the Freewest Option property began in the first quarter of fiscal 2008. This diamond drilling program initially focused near and around a previously discovered chrome-nickel-

- 5 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

platinum group element occurrence in peridotite that had many geological similarities to the new discovery area of Noront. The initial program that ended in late April just prior to winter operations being terminated due to breakup resumed in early July. The chrome occurrence was tested with several more holes traced to depth and along strike until the end of October.

On August 19, 2008, Spider reported that the previously postulated thickening of the chromite layers had been confirmed by the recent drilling, which indicates a thickening of chromite beds of up to 45.6 metres. Further drilling would be required to confirm continuity of mineralization to the northeast and southwest with the goal of completing a NI 43-101 compliant mineral resource for chromite on the property.

On October 21, 2008, the Company reported that, since June 2008, the main exploration focus of the Spider-KWG joint venture has been on the massive chromite occurrence. As a result of the recent drilling completed, the occurrence is now referred to as the “Big Daddy Chromite Deposit”. This deposit is located approximately 3.6 kilometres northeast of Noront’s Eagle One Magmatic Massive Sulphide (nickel copper and PGM), or five kilometres northeast of Noront’s Blackbird One and Two (chromite) discoveries, and four kilometres southwest of Freewest’s Black Thor chromite discovery.

Diamond drilling by the Spider/KWG joint venture has identified a northeast trending zone of continuous chromite that extends from local grid line 9+00 metres NE to 13+00 m NE. The mineralized zone dips near vertically and consists of varying widths of a variable tenor of chrome mineralization, forming a series of stacked horizons. Additional infill drilling will be required to confirm continuity of the horizons that form beds or lenses from section to section. The following table summarizes the reported highlights of the 2008 drill program:

Hole ID	From (m)	To (m)	Int (m)	Cr2O3 %	Cr %	Fe %	Cr:Fe	Pt g/t	Pd g/t	Au g/t	TPM g/t	Cu%	Ni %

FW-08-05	75.0	77.0	2.0	2.00	1.40			0.03	0.05			NSA	0.15
then	160.7	165.0	4.3	2.20	1.50			0.42	0.58			NSA	0.11
then	174.0	183.2	9.2	14.94	10.21			0.15	0.34			NSA	0.21
then	192.0	195.0	3.0	3.20	2.20			0.10	0.20			NSA	0.25
then	208.5	210.4	1.9	31.10	12.50			0.11	0.21			NSA	0.19
then	222.6	225.0	2.4	1.23	0.84			0.05	0.13			NSA	0.24
then	240.0	305.0	65.0	15.50	10.60			0.10	0.11			NSA	0.15
then	251.2	279.0	27.8	22.70	15.53			0.10	0.17			NSA	0.17
then	291.4	298.9	7.5	35.60	24.40			0.09	0.03			NSA	0.11

FW-08-06	285.0	286.5	1.5	0.50	0.34	6.20	0.05	0.99	0.50	0.03	1.50	NSA	0.09
then	289.5	295.5	6.0	0.27	0.16	3.20	0.05	0.42	0.20	0.01	0.62	NSA	0.04
then	328.5	336.0	7.5	7.15	4.02	9.90	0.41	0.16	0.18	0.02	0.35	NSA	0.14
then	339.0	340.2	1.2	24.64	8.89	21.70	0.41	0.04	0.07	0.00	0.11	NSA	0.17
then	377.1	384.0	6.9	9.73	3.74	11.10	0.34	0.08	0.12	0.01	0.21	NSA	0.14

FW-08-07	64.5	73.5	9.0	nil	0.5	7.0	0.07	0.19	0.19	1.81	2.18	NSA	0.08
then	100.3	108.0	7.7	9.17	6.27	10.80	0.58	0.27	0.33	0.02	0.61	NSA	0.14

- 6 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

then	115.5	119.1	3.6	4.58	3.13	8.20	0.38	0.38	0.62	0.02	1.03	NSA	0.21
then	166.5	176.7	10.2	13.14	8.99	8.80	1.02	0.14	0.29	0.02	0.45	NSA	0.17
then	193.5	205.9	12.4	25.50	17.43	15.40	1.13	0.30	0.41	0.03	0.74	NSA	0.12
then	209.8	224.2	14.4	30.73	21.01	17.60	1.19	0.26	0.13	0.03	0.42	NSA	0.07

FW-08-08	no significant assays, hole being relogged and resampled

FW-08-09	no samples selected, hole being relogged and sampled

FW-08-10	no significant assays

FW-08-11	169.3	171.1	1.8	NSA	NSA	NSA	NA	0.02	0.22	0.41	0.66	0.18	0.37
then	175.6	182.7	7.1	NSA	NSA	NSA	NA	0.05	0.27	0.03	0.35	0.15	0.27

FW-08-12	130.5	139.5	9.0	NSA	NSA	NSA	NA	0.55	0.51	0.07	1.13	NSA	0.05
then	208.7	213.0	4.3	9.30	6.40	9.90	0.65	0.15	0.08	0.01	0.24	NSA	0.18
followed by	213.0	228.3	15.3	0.80	0.55	2.20	0.25	0.15	0.05	0.01	0.21	NSA	0.25
followed by	228.3	244.8	16.5	39.70	27.20	16.00	1.70	0.41	0.18	0.01	0.60	NSA	0.17
followed by	244.8	251.0	6.2	NSA	NSA	NSA	NA	0.23	0.05	0.01	0.29	NSA	0.22
followed by	251.0	264.3	13.3	36.43	24.90	14.20	1.80	0.29	0.23	0.01	0.53	NSA	0.10

FW-08-13	55.3	74.3	18.8	NA	NA	NA	NA	0.04	0.12	0.00	0.16	NSA	0.25
followed by	74.3	142.2	67.9	25.10	17.20	15.20	1.13	0.19	0.20	0.01	0.40	NSA	0.13
including	90.0	102.0	12.0	29.10	19.90	15.50	1.28	0.23	0.17	0.00	0.40	NSA	0.12

FW-08-14	30.0	103.5	73.5	29.60	20.20	15.80	1.30	0.17	0.19	0.01	0.37	NSA	0.11
including	40.5	51.0	10.5	36.30	24.80	16.40	1.50	0.20	0.13	0.01	0.33	NSA	0.11
followed by	103.5	117.0	13.5	NA	NA	NA	NA	0.78	0.99	0.04	1.81	NSA	0.09
including	113.6	117.0	3.4	NA	NA	NA	NA	2.21	2.15	0.08	4.44	NSA	0.09

FW-08-15	73.5	81.0	7.5	NA	NA	NA	NA	0.25	1.23	0.01	1.49	NSA	0.16
followed by	81.0	173.8	92.8	12.30	8.40	10.70	0.79	0.13	0.22	0.00	0.45	NSA	0.14
including	159.2	171.3	12.1	33.10	22.60	19.10	1.18	0.20	0.25	0.01	0.46	NSA	0.12
then	173.8	179.1	5.3	NA	NA	NA	NA	0.73	1.63	0.14	2.50	0.46	0.30

FW-08-16	138.0	139.0	1.0	NSA	NSA	NSA	NA	NSA	NSA	NSA	NSA	0.93	2.04

FW-08-17	146.5	148.0	1.5	NSA	NSA	NSA	NA	NSA	NSA	0.01	0.01	0.12	0.01

FW-08-18	18.0	33.0	15.0	6.30	4.30	9.70	0.44	0.05	0.04	0.01	0.10	NSA	0.14

- 7 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

then	67.5	138.0	70.5	24.90	17.00	13.00	1.31	0.10	0.11	0.00	0.21	NSA	0.13
including	106.0	138.0	32.0	37.50	25.60	15.70	1.63	0.09	0.06	0.00	0.15	NSA	0.11

FW-08-19	141.0	162.0	21.0	12.04	8.23	10.13	0.81	0.12	0.14	0.01	0.27	NSA	0.15
including	141.5	144.1	2.6	31.32	21.40	13.79	1.55	0.20	0.22	0.02	0.44	NSA	0.13
then	162.0	183.0	21.0	NA	NA	NA	NA	0.70	0.94	0.05	1.69	NSA	0.34
including	167.2	171.0	3.8	NA	NA	NA	NA	2.15	2.86	0.17	5.18	NSA	0.14
then	183.0	229.5	46.5	37.18	25.44	15.30	1.66	0.21	0.19	0.00	0.40	NSA	0.11

FW-08-20	261.0	337.0	76.0	23.25	15.90	11.32	1.40	0.15	0.14	0.01	0.30	NSA	0.13
including	304.3	337.0	32.7	39.56	27.06	14.37	1.88	0.22	0.17	0.01	0.40	NSA	0.11

FW-08-21	259.5	282.0	22.5	1.29	0.88	6.38	0.14	0.07	0.14	0.00	0.21	NSA	0.30
then	313.5	318.9	5.5	0.75	0.51	1.90	0.27	0.27	0.44	0.01	0.72	NSA	0.12
followed by	318.9	321.0	2.1	17.47	11.94	24.46	0.49	0.13	0.26	0.00	0.49	NSA	0.11
then	360.0	417.0	57.0	17.52	11.98	11.63	1.03	0.11	0.14	0.11	0.36	NSA	0.14
including	376.0	385.8	9.8	31.90	21.84	18.29	1.19	0.12	0.07	0.00	0.19	NSA	0.08
also including	406.2	417.0	10.8	39.22	26.81	17.53	1.53	0.16	0.11	0.56	0.83	NSA	0.11

FW-08-22	54.3	57.0	2.7	6.12	4.19	9.57	0.44	0.05	0.05	0.01	0.11	NSA	0.08
followed by	192.2	298.5	106.3	19.41	13.28	11.33	1.17	0.13	0.15	0.01	0.29	NSA	0.14
including	263.7	298.5	34.8	42.08	28.79	15.92	1.81	0.19	0.17	0.01	0.37	NSA	0.11
then	298.5	303.0	4.5	nsv	nsv	nsv	nsv	0.43	0.85	0.05	1.33	NSA	0.08

FW-08-23	263.5	378.0	114.5	17.65	12.07	11.04	1.09	0.11	0.13	0.00	0.25	NSA	0.13
including	334.5	378.0	43.5	34.96	23.92	13.95	1.71	0.18	0.13	0.01	0.32	NSA	0.11
including	353.0	372.0	19.0	40.00	27.37	14.81	1.85	0.20	0.10	0.01	0.30	NSA	0.10
followed by	378.0	382.0	4.0	40.84	27.94	16.75	1.67	1.08	1.50	0.08	2.66	NSA	0.13

The deposit remains open to depth as well as along strike in both directions. In addition, near surface drilling of the upward extension to surface has not been completed. A number of faults were noted from the drilling, some of which occur at the contact of the chromite with the surrounding peridotite/dunite. These fault sets are also being modeled, as they affect the interpretation and continuity of the mineralization from section to section.

The joint venture partners commissioned James R. Guilinger of World Industrial Minerals of Arvada, Colorado, to perform initial investigations into the metallurgical characteristics of samples selected from the project. Mr. Guilinger is a Registered Member (RM) with the Society of Mining Engineers (SME) and a Qualified Person (QP), as defined under National Instrument 43-101, with the Mining and Metallurgical Society of America (MMSA). His work entailed a petrographic examination and XRF/XRD analyses on eight selected split core samples from earlier drill-hole intercepts within the main massive chromite zone at the Big Daddy Chromite occurrence. These samples were selected from holes FWR-08-05 and FWR-08-

- 8 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

07. The results presented herein are preliminary in scope; much more metallurgical work and beneficiation studies need to be performed.

World Industrial Minerals utilized Phillips Enterprises, LLC of Golden, Colorado, to perform preliminary beneficiation tests on the quarter core samples submitted. The general scope of the initial metallurgical test work was to provide information on the various processing techniques typically used to beneficiate chrome, to determine the preferred general process required to upgrade the chromite at the Big Daddy to a saleable product. As part of the metallurgical study, Phillips Enterprises, in conjunction with World Industrial Minerals (under the auspices of Mr. Guilinger), used DCM Science Laboratory of Wheat Ridge, Colorado, to provide X-ray Diffraction (XRD) analysis as well as petrographic analysis on the samples to provide information needed with respect to mineralogy and chromite content in the selected samples. Assay determinations were provided by The Mineral Lab Inc. of Lakewood, Colorado. The assay technique used by The Mineral Lab was X-Ray Fluorescence (XRF).

The following is a summary of Mr. Guilinger's report:

Preliminary beneficiation tests on the samples were completed at Phillips Enterprises as follows:

1. Core samples used for the test work were crushed and blended to -70 + 140 mesh in a rod mill;

2. Crushed fine material was screened at -140 mesh and sent to a flotation circuit. The -70 mesh + 140 mesh coarse material was sent to a gravity circuit that consisted of a gravity sorting table;

3. Two products were made from the gravity circuit: a) concentrate and b) the 'middlings';

4. A float concentrate product was made from the -140-mesh material.

The initial crushed and screened sample plus all of the resulting products were analyzed at Hazen Research of Golden, Colorado. The samples were fused with sodium peroxide. The melt was dissolved and diluted to volume in 10% HCl and then analyzed by Atomic Absorption for Cr2O3 with the following results:

- Head grade of composite sample was 37% Cr2O3. The chemically analyzed head grade is slightly higher than the calculated weight percent of the XRF results listed above.

- The gravity separation of the -70 + 140 mesh material had a Cr2O3 recovery of 47% based on the total sample. The gravity concentrate grade (concentrate plus middling) was 49% Cr2O3.

- The flotation separation on the -140 mesh (fines) fraction had a Cr2O3 recovery of 28% based upon the total sample. The flotation grade was determined to be 43% Cr2O3.

- In summary, 74% of the chromite contained in the composite sample was recovered using a combination of flotation and gravity separation techniques, and this concentrate has an average grade of 46.6% Cr2O3.

- Mr. Guilinger states: “The processed cores easily exceed the minimum 40% Cr2O3 grade threshold that the marketplace prefers.”

Mr. Guilinger in his report recommended the following:

- 9 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

1) Continue with the beneficiation to optimize chromite recovery and reduce the silica content to greater than 3% (on representative samples of the deposit as a whole); and

2) Discuss chrome product specifications with potential consumers.

Overall, it was concluded that the ferrochrome product from the aforementioned testing of the Big Daddy Chrome Deposit provides a concentrate that is very close to meeting specifications for the largest consumers of chromite (ferrochrome), representing about 95% of the market. Results of the metallurgical study also concluded that the concentrate has a favourable Cr:Fe ratio of 2.07. It was noted by Mr. Guilinger that: “With optimization of the gravity and flotation it should be possible to create a product suitable for approximately 98% of the world markets.”

The preliminary metallurgical report received from World Industrial Minerals is not considered by management of the Company to be compliant with respect to NI 43-101 guidelines. It is considered preliminary and is being used as a guide for additional metallurgical work on the chrome deposit.

During the latter part of 2008, several joint venture meetings were held, pursuant to ongoing planning for the project during fiscal 2009. On December 15, 2008, the Company announced that the preparation of a National Instrument 43-101 report was commissioned to Micon International Ltd.

It is anticipated that the Company will need to expend in the order of $2.5 million during 2009 to maintain and increase its respective interest in this project and is in the process of raising sufficient funds to do this. At present the earn-in option agreement is being reviewed with the purpose of being amended to allow for a three-year continuation, to expend $15 million (50% is the responsibility of the Company) at the rate of $5 million per year ($2.5 million is the responsibility of the Company) to earn an additional 10% interest (the Company would earn 5%) in the project from Freewest.

Diagnos Initiative Properties

These properties are prospective for kimberlite and are located in the vicinity of the Kyle properties in the James Bay Lowlands area of Northern Ontario. The properties were acquired by staking and a purchase agreement during 2005. During the first quarter of 2006 the Company completed ground geophysical surveying on the six properties. This exploration work has been compiled and interpreted as required for drill positioning, and the Company has presented the results to its joint venture partner for discussion and planning. The Company intends to continue the review of the geophysical results and make plans for drilling selected anomalies during fiscal 2009. Consequently, exploration costs for 2009 have been allocated to this project. The cost of this program, if undertaken, will be shared equally with KWG Resources. Follow up diamond drilling is contemplated for 2009. It is anticipated that one target will be drill tested during 2009 on this project.

McFaulds Lake VMS Properties

This project covers three properties, the McFaulds (East) property, the McFaulds (West) property and the McFaulds (North) property. Collectively, these volcanogenic massive sulphide (VMS) properties cover approximately 31,000 hectares and are located in the western portion of the James Bay Lowlands. The VMS potential of this diamond exploration project became apparent in 2002 while exploring in joint venture with De Beers Canada Exploration Limited. As a result of the discovery of VMS style mineralization, the Company and its joint venture partner, KWG, completed several exploration campaigns

- 10 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

including diamond drilling programs during the period 2003 to early 2007, outlining several VMS style occurrences, including two where definition drilling was completed (McFaulds #1 and #3 VMS occurrences).

During the first quarter of 2007, on March 7, 2007, the Company announced the signing of a Letter of Intent (LOI), with UC regarding a four year exploration program on the McFaulds Lake project. This LOI outlined the terms and conditions upon which UC has an option to earn-in up to a 55% undivided interest in the McFaulds Lake project, leaving 45% to be shared pro rata by the Company and KWG. During 2008, this agreement was reviewed and amended and became subject to execution of definitive documentation, board and regulatory approval. The amendment was signed in early 2009. To date, UC has earned a 25% interest in the project and must incur exploration expenditures of at least an additional $1.25 million on or before the third anniversary date of the LOI in order to earn an additional 15% vested interest in the property, bringing UC’s interest level to 40%. Upon spending an additional $1.25 million prior to the fourth anniversary, UC can earn the entirety of its 55% interest. Then the option agreement would be fulfilled and the a formal joint venture would be entered into, with UC holding 55% interest and the Company and KWG holding the remaining 45% interest. The Company will then start spending during the KWG dilution phase, where KWG’s interest can be reduced to 15%, leaving the Company with 30%, after which all parties contribute pro rata or undergo additional dilution.

At present the McFaulds Lake project area is the focus of attention as a result of some very encouraging news by other explorers in the region, namely Noront and its recent magmatic massive sulphide (“MMS”) occurrence located 27.4 km to the west-southwest of the McFaulds Lake VMS occurrences. The MMS style mineralization encountered by Noront contains appreciable copper, nickel, platinum, palladium and gold. The geophysical anomalies associated with this type of occurrence are slightly different than those of VMS style mineralization. The historical geophysics over the McFaulds Lake projects (E and W) were reviewed in late 2007 by UC Resources Ltd. (“UC”) to ascertain whether there are similar-looking MMS anomalies on the property. Spider management assisted in this review and planning. As a result of the review, UC agreed to participate in a new regional AeroTEM2 airborne survey with others in the area. This survey commenced in late 2007 and was completed in early 2008; results were immediately reviewed. Several anomalous areas were prioritized for ground geophysical follow-up that included line cutting, magnetic surveying and electromagnetic surveying. Drilling commenced on the western property in October 2008.

UC announced that it started the drill program on September 29, 2008. As previously mentioned in a UC press release dated July 28, 2008, UC committed to an initial 2,500 metre drill program. The first target, known as the “hook target”, is located 5.5 km west-southwest of Noront Resources Ltd.’s Eagle One discovery. Drilling was planned to continue until freeze up on six high priority targets in the McFaulds West claim block. Over the course of the program, only five holes were completed. Results of the drilling were announced by UC in early 2009, and only anomalous values of copper and zinc were encountered.

In late 2008, UC commenced line cutting followed by detailed ground geophysics on targets that were too wet to access under summer conditions and had geophysically postulated chrome potential. Reviews of recent and historical airborne geophysics along a northeast trending magnetic rendered feature continuation of ultramafic sill from the Big Daddy Chrome occurrence, passing through Freewest’s Black Thor chromite occurrence, inferred prospective chromite targets located in the western portion of the McFaulds East claim block just west of McFaulds #1 and #3 VMS deposits, near the common boundary shared with Noront. Intense magnetic anomalies are traceable to the southwest towards the new chromite discovery of Freewest, extending into the Freewest option property. The ground geophysical surveys

- 11 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

included magnetic and gravimetric surveying. Results are pending. Because this project is funded by UC, the Company has no financial requirements for this project during fiscal 2009.

Spider #1 Project Area (includes Kyle and MacFadyen properties)

The Spider #1 project is a regional reconnaissance project located on the western edge of the James Bay Lowlands in northern Ontario. The project was initiated in the early 1990s to explore diamond bearing kimberlite bodies. The project encompasses numerous identified kimberlite occurrences and two distinct project areas, the Kyle project and the MacFadyen project. The project area (except for the Kyle Lake #1 Kimberlite) is subject to an agreement whereby Ashton Mining of Canada may acquire a 25% interest under certain conditions. The Company maintains interest in a minimum number of claims that effectively cover the identified kimberlites. The Kyle properties are currently the subject of an option agreement with Renforth Resources Inc. (“Renforth”), (formerly Wycliffe Resources Inc.), whereby Renforth can earn up to a 55% interest in the Kyle properties.

Kyle Properties

These properties consist of five diamondiferous kimberlites, including Kyle Lake #1 and Kyle #3, both of which have undergone mini-bulk testing in earlier exploration campaigns by the Company. Kyle 2, 4 and 5 properties require additional exploration work, having been the subject of only preliminary drilling in 1994 and 1995 by the Company.

These properties are currently subject to an option agreement with Renforth whereby Renforth can earn up to a 55% interest. In order to earn its interest, Renforth must make an aggregate of $6 million in exploration expenditures by June 30, 2009, with annual exploration expenditure requirements of $2.0 million. The option agreement was amended in 2007 whereby Renforth advised that it failed to complete the minimum expenditure due by June 30, 2007, and requested an amendment whereby it could make payment in lieu of expenditures. Both Spider and KWG agreed to the amendment. Renforth sought and received a one year extension on the next work commitment that was due on June 30, 2008. In partial payment for these concessions, Renforth has agreed to pay Spider and KWG shares valued at $1.0 million, to be shared in a pro rata manner between Spider and KWG, the levels to be reflective of each party’s current interest level. At the date of this MD&A, Spider has not received the Renforth shares.

In addition, Renforth must contribute all of its existing claim holdings (15 claims covering 3,616 hectares) in the Attawapiskat River area, to be added to the Kyle project area.

Spider/KWG will retain a collective 45% in the Kyle properties once Renforth has earned its 55% interest, and Renforth will transfer 45% interest in its own properties in the project area to Spider/KWG. No less than 75% of the annual $2 million expenditure must be dedicated to the Kyle properties in order for Renforth to acquire its 55% interest. Renforth agreed to fund the project in its entirety for the first three years and as such, is the operator during the earn-in option period.

Pursuant to the revision to the Spider/KWG joint venture dated May 12, 2006, KWG agreed to not contribute further to Spider’s exploration program on the Kyle kimberlite project and as such appointed Spider as manager. In May, 2006, both parties were deemed to have a 50% interest in the Kyle kimberlite project. Once Renforth has earned its 55% interest in the project, the underlying agreement terms will apply to Spider and KWG in determination of their respective interests.

- 12 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

During 2008 Renforth proceeded with the procurement of mini-bulk samples for diamond content that included the testing of each of the remaining Kyle kimberlites, which had not yet undergone a minimum sampling program of three or four tonnes. Kyle Lake #1 and Kyle #3 had been tested by the Company and KWG by mini-bulk sampling much earlier with favourable results. Renforth intends on comparing information from each of the five kimberlites to determine which kimberlite(s) warrant much larger tests. The sampling has been completed, and samples are now awaiting processing for commercial diamond content, as well as micro-diamond content on eight kilogram samples taken from the feed stream to the commercial size diamond sampling plant.

As a result of this project being funded by Renforth’s earn-in agreement, Spider expects to only contribute a minor amount of the spending.

MacFadyen Property

This property now includes diamond-bearing kimberlites located 8 kms north of the Victor diamond mine development project of De Beers Canada Explorations Inc., scheduled to commence full production in 2008.

The Company announced in May 2006 that under a revision to the joint venture with KWG, the Company has permitted its interest level to be diluted to a one-third interest level, allowing KWG to expend sufficient funds on its own to obtain up to a two-thirds interest level. An Exploration Agreement was negotiated with the Attawapiskat First Nation covering further exploration programs to be undertaken at the property by KWG over the next two years. Upon its signing, KWG commenced a reconnaissance program in September, and made preparations for a winter drilling program to sample each of the five kimberlite pipes that constitute the MacFadyen cluster.

Initial results of the kimberlite processing of a drilling program carried out by KWG was reported on June 21, 2007, when KWG announced that a 0.23 quarter-carat diamond had been recovered from one of its MacFadyen kimberlite samples. Bulk sample processing and diamond sorting and picking were executed at the SGS Lakefield Research Laboratory in Lakefield, Ontario.

Further work on the project was planned by KWG to commence in early 2008; however, this project was curtailed due to the unavailability of sampling equipment at the project site. It is expected that KWG will resume work during the winter of 2009 subject to availability of sampling equipment.

As a result of this project being the focus of KWG until Spider is diluted to a one-third interest level, Spider does not expect to expend any funds on this project in the near future.

Project #6 Wawa Diamond Property

This project is located 35 km north of Wawa in central Ontario on the northeast shore of Lake Superior along the Trans-Canada Highway (Hwy 17), encompassing 45 square kilometres. On February 20, 2006, Spider and KWG announced that they recovered 1,337 diamonds from an 8-kg sample at the Wawa project, as well as the following findings.

Sample weight (kg)	Total weight (carats)	Total # recovered	Greater than 0.105 mm		Greater than 0.150 mm	Greater than 0.212 mm	Greater than 0.300 mm
Matrix	16.49	0.008	67	48	17	0	1

- 13 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Xenolith	16.03	0.051	244	93	80	36	22
ROM	16.54	0.006	86	53	23	8	2

On March 23, 2006, Spider and KWG received a SGS Lakefield Research Ltd. report on encouraging rock characteristics of the Wawa diamond project. This report described potential beneficiation results based upon physical properties of the xenolith portion of the rock versus the matrix portion of the rock. Additional testwork concluded that most of the diamonds in the rock are contained within the xenolith; this was verified by caustic dissolution diamond analysis. Tests were undertaken to better understand the overall recoverability of diamond from rock, and to determine which process(es) can be used to separate the diamond bearing xenolith from the less diamondiferous matrix. Spider is currently planning to follow up with SGS’s recommendations, including diamond drilling the main diamond occurrence. A National Instrument 43-101 compliant report was prepared and filed with Sedar during the first quarter of 2006 containing recommendations for follow-up.

The Company continues to monitor the exploration activity in this area, and is reviewing the recent results of this project in making plans for an initial drill program to test the main diamondiferous occurrence to depth. During the last few days of Q3, a drill rig was mobilized to this project to commence drilling in early October, to test to depth the main diamond showing in Lalibert Township.

In October, 2008, Spider / KWG completed a drill program entailing four short, HQ core holes totalling 307 metres. These holes were designed to undercut a lamprophyre dyke that hosts numerous diamond bearing xenoliths. This dyke had been previously exposed in 2004 / 2005 by mechanical stripping over a strike length in excess of 300 m. The dyke varies in exposed width from 8 to 22 m, and dips an estimated 45 degrees towards the northeast. Diamonds had been recovered from all but two of the 39 surface grab or chip-channel samples collected from the length of the dyke. Diamonds had been previously determined to be preferentially located in talc-actinolite xenoliths. The most diamonds recovered were from a 30.11 kilogram sample of talc-actinolite xenoliths (sample # LAL-04-234) which yielded 1351 diamonds with two dimensions less than 0.5mm, 267 diamonds with two dimensions greater than 0.5mm and less than 1.0mm and 14 diamonds with two dimensions greater than 1.0mm.

Following are plans related to the Company’s properties for fiscal 2009. Planned expenditures for fiscal 2009 have been estimated based upon minimum expenditure requirements. Additional expenditures have been revised downwards primarily due to the current weakening global economy. See “Trends”.

Project/Property Name	Plans for Project	Planned expenditures for fiscal 2009	Timing for Completion of Planned Activities	Expenditures to December 31, 2008	Remaining Commitment
Freewest Option	Exploration with intent to define resource	$2,500.000 (1)	Q4 ‘09	$1,769,913	$5,000,000 (See Subsequent Events (b) below)

- 14 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Diagnos Iniative	Drill test one anomaly	$100,000 (1)	Q4 ‘09	$66,919	$0
McFaulds Project (W) McFauld Project (E) McFaulds Project (N)	UC to continue its earn-in	$0 $0 $0	NA	$5,999,624	$0
Kyle Project Renforth claims	Renforth to continue its earn-in	$0	NA	$7,379,737	$0
Wawa Project	Process samples from project	$100,000 (1)	Q4 ‘09	$1,133,232	$0
MacFadyen Project	KWG to continue its earn-in to 66.6%	$0	NA	$0	$0

(1) Discretionary expense

TECHNICAL DISCLOSURE

Mr. Neil Novak, P.Geo., President, Chief Executive Officer and Director of the Company, is a Qualified Person as defined under National Instrument 43-101. Mr. Novak has reviewed and verified the technical information in this MD&A.

- 15 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

ENVIRONMENTAL LIABILITIES

OVERALL OBJECTIVE

The Company’s business objective is to discover a viable mineral deposit, more specifically copper, chromite and zinc, on a property on which it holds an interest. The Company is in the process of exploring its mining interests and has not yet determined whether these properties contain an economic mineral deposit. The recoverability of the amounts shown for mining interests is dependent upon: the selling price of copper, chromite and zinc at the time the Company intends to mine its properties; the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government policies and regulations; and future profitable production or proceeds from disposition of such properties.

The Company believes that although the exploration of its existing projects is positive, mineral exploration in general is uncertain. As a result, the Company believes that by acquiring additional mineral properties, it is able to better minimize overall exploration risk. In conducting its search for additional mineral properties, the Company may consider acquiring properties that it considers prospective based on criteria such as the exploration history of the properties, the location of the properties, or a combination of these and other factors. Risk factors to be considered in connection with the Company’s search for and acquisition of additional mineral properties include the significant expenses required to locate and establish mineral reserves; the fact that expenditures made by the Company may not result in discoveries of commercial quantities of minerals; environmental risks; risks associated with land title; the competition faced by the Company; and the potential failure of the Company to generate adequate funding for any such acquisitions. See “Risk Factors” below.

SELECTED ANNUAL INFORMATION


	Year Ended December 31, 2008 ($)	Year Ended December 31, 2007 ($)	Year Ended December 31, 2006 ($)

Net loss for the year	(716,861)	(41,336)	(1,240,417)

Basic and diluted loss per share	(0.00)	(0.00)	(0.01)

Total assets	22,417,191	22,003,899	16,711,266

Future income tax liability	2,837,475	2,688,582	2,964,090

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Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

	·	The net loss for the year ended December 31, 2008, consisted primarily of a future income tax recovery of $460,107. This amount was offset by (i) stock options of $457,800; and (ii) other working capital expenditures incurred to maintain the operations of the Company.

	·	The net loss for the year ended December 31, 2007, consisted primarily of a future income tax recovery of $571,352 and was offset by other working capital expenditures incurred to maintain the operations of the Company.

	·	The net loss for the year ended December 31, 2006, consisted primarily of a future income tax recovery of $154,962. This amount was offset by (i) stock options of $848,767; and (ii) other working capital expenditures incurred to maintain the operations of the Company.

	·	As Spider presently has no revenue, the Company’s ability to fund its operations is dependent upon its ability to secure financing through equity or the sale of assets. The value of any resource property asset is dependent upon the existence of economically recoverable mineral reserves, the ability to obtain the necessary financing to complete exploration and development, and the future profitable production or proceeds from disposition of such properties. See “Trends” above and “Risk Factors” below.

SUMMARY OF QUARTERLY RESULTS

	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
	December 31,	September 30,	June 30,	March 31,
	2008	2008	2008	2008
Revenue (including interest income)	$0	$0	$0	$0
Expenses	$732,804	$163,338	$157,892	$122,934
Gain on sale of marketable securities	$0	$0	$0	$0
Future income tax (recovery)	($460,107)	$0	$0	$0
Net income (loss)	($272,697) (1)	($163,338) (2)	($157,892) (3)	($122,934) (4)
Net income (loss) per share basic	$0	$0	$0	$0
Net income (loss) per share diluted	$0	$0	$0	$0
Cash flows from (used in) operating activities	($375,190)	$59,286	($370,928)	($231,955)
Cash and cash equivalents, end of period	$3,205,855	$4,102,592	$4,602,542	$4,653,526
Assets	$22,417,191	$22,852,916	$22,548,038	$22,136,982
Long term liabilities	$2,837,475	$3,392,082	$3,392,082	$3,392,082

	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter
	December 31,	September 30,	June 30,	March 31,
	2007	2007	2007	2007
Revenue (including interest income)	$0	$0	$0	$137

- 17 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Expenses	$200,436	$92,270	$168,570	$151,549
Gain on sale of marketable securities	$0	$0	$0	$0
Future income tax (recovery)	($571,352)	$0	$0	$0
Net income (loss)	$370,916 (5)	($92,270) (6)	($168,570) (7)	($151,412) (8)
Net income (loss) per share basic	$0	$0	$0	$0
Net income (loss) per share diluted	$0	$0	$0	$0
Cash flows from (used in) operating activities	$100,652	($221,292)	($272,450)	($90,841)
Cash and cash equivalents, end of period	$4,912,931	$524,554	$32,753	$554,558
Assets	$22,003,899	$17,443,282	$16,941,882	$17,176,203
Long term liabilities	$2,688,582	$3,259,934	$3,259,934	$3,259,934

Notes:

	(1)	The net loss of $272,697 principally relates to (i) stock based compensation of $457,800; (ii) future income tax recovery of $460,107; (iii) professional fees of $60,000; and (iv) consulting fees of $47,500. All other expenses relate to general working capital purposes.
	(2)	The net loss of $163,338 principally relates to (i) accounting and corporate services of $37,004; (ii) consulting fees of $32,500; (iii) management fees of $24,011; and (iv) professional fees of $15,030. All other expenses relate to general working capital purposes.
	(3)	The net loss of $157,892 principally relates to (i) shareholder relations expense of $50,576; (ii) consulting fees of $25,000; (iii) management fees of $24,000 and (iv) professional fees of $16,060. All other expenses relate to general working capital purposes.
	(4)	The net loss of $122,934 principally relates to (i) shareholder relations expense of $27,239; (ii) consulting fees of $17,000; (iii) management fees of $24,446 and (iv) accounting and corporate services of $13,418. All other expenses relate to general working capital purposes.
	(5)	The net income of $370,916 principally relates to (i) future income tax recovery of $571,352; (ii) transfer agent, listing and filing fees of $37,896; (iii) professional fees of $29,810; and (iv) consulting fees of $26,500. All other expenses relate to general working capital purposes.
	(6)	The net loss of $92,270 principally relates to (i) professional fees of $28,602; (ii) consulting fees of $23,000; and (iii) management fees of $16,513. All other expenses relate to general working capital purposes.
	(7)	The net loss of $168,570 principally relates to (i) shareholder relations expense of $87,231; (ii) consulting fees of $19,000; (iii) management fees of $32,719; and (iv) accounting and corporate services of $15,716. All other expenses relate to general working capital purposes.
	(8)	The net loss of $151,412 principally relates to (i) consulting fees of $40,438; (ii) management fees of $33,031; and (iii) shareholder relations expense of $28,593. All other expenses relate to general working capital purposes.

RESULTS OF OPERATIONS

Year ended December 31, 2008, compared with year ended December 31, 2007

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Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

The net loss from operations for the year ended December 31, 2008, was $716,861 or $0.00 per share, compared to $41,336 or $0.00 for the comparative period in 2007. The $675,525 increase in the loss from operations is driven by several variables, including:

	·	Stock option compensation during the year ended December 31, 2008, was $457,800 (year ended December 31, 2007 - $nil). During the year ended December 31, 2008, the Company issued 10,900,000 options compared with nil in the comparative period. The options issued vested in accordance with the stock option plan. Users of the financial statements should be cautious of the valuation of stock option compensation since its calculation is subjective and can impact net income (loss) significantly.

	·	Future income tax recovery during the three months ended December 31, 2008, was $460,107 (three months ended December 31, 2007 - $571,352). The $111,245 decrease in 2008 is due to a decrease in the difference between the Canadian resource tax pool for Canadian tax purposes and carrying amount for mining interests for accounting purposes.

	·	The increase in accounting and corporate services of $32,888 during the year ended December 31, 2008, over the comparative period resulted from advisory services in connection with negotiating the form of a joint venture agreement among Spider, KWG and UC.

	·	Transfer agent, listing and filing fees during the year ended December 31, 2008, were $23,493 (year ended December 31, 2007 - $51,654). The decrease of $28,161 is attributable to higher transfer costs from the significant number of equity transactions that occurred during the fiscal 2007 period.

	·	Advertising and promotion increased by $46,926 during the year ended December 31, 2008, over the same comparative period as a result of the Company expensing its share of the Air Canada Suite License Fee (the “License”) over the expected term of the License, and website development and maintenance.

	·	The $97,845 increase in general and administration for the year ended December 31, 2008, over the same comparative period in 2007 is a result of flow-through interest expense for the year, administrative services provided by Billiken Management Services Inc. and directors’ fees paid during the year. In the comparative 2007 period the charges for these expenses were minimal.

	·	Shareholder relations expense during the year ended December 31, 2008, was $83,319 (year ended December 31, 2007 - $141,700). The decrease of $58,381 resulted from less corporate activity and the timing of supplier invoices.

	·	The increase of $29,532 in professional fees during the year ended December 31, 2008, over the same comparative period in 2007 resulted from an increase in audit fee accrual during the year.

	·	The decrease of $7,927 in management fees during the year ended December 31, 2008, over the same comparative period in 2007 is a result of oversight over the exploration projects becoming the sole responsibility of the President of the Company in 2008 compared to 2007 when responsibility was assigned to Billiken and the President.

- 19 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

	·	The increase of $19,091 in travel during the year ended December 31, 2008, over the same comparative period in 2007 resulted from an increase in corporate activity requiring more travel during the period.

	·	The decrease in capital tax of $38,951 during the year ended December 31, 2008, over the comparative period in 2007 is a result of an overprovision of capital tax in the year ended December 31, 2007.

	·	Other expense fluctuations can be related to small variances seen in consulting fees, occupancy costs, interest and bank charges and insurance.

Three months ended December 31, 2008, compared with three months ended December 31, 2007

The net loss from operations for the three months ended December 31, 2008, was $272,697 or $0.00 per share, compared to net income of $370,916 or $0.00 for the comparative period in 2007. The $643,613 increase in the loss from operations is driven by several variables, including:

	·	Stock option compensation during the three months ended December 31, 2008, was $457,800 (three months ended December 31, 2007 - $nil). During the three months ended December 31, 2008, the Company issued 10,900,000 options compared with nil in the comparative period. The options issued vested in accordance with the stock option plan. Users of the financial statements should be cautious of the valuation of stock option compensation since its calculation is subjective and can impact net income (loss) significantly.

	·	Future income tax recovery during the three months ended December 31, 2008, was $460,107 (three months ended December 31, 2007 - $571,352). The $111,245 decrease in 2008 is due to a decrease in the difference between the Canadian resource tax pool for Canadian tax purposes and carrying amount for mining interests for accounting purposes.

	·	Transfer agent, listing and filing fees during the three months ended December 31, 2008, were $1,427 (three months ended December 31, 2007 - $37,896). The decrease of $36,469 is attributable to higher transfer costs from the significant number equity transactions that occurred during the comparative 2007 period.

	·	The $89,687 increase in general and administration expenses for the three months ended December 31, 2008, over the same comparative period in 2007 is a result of flow-through interest expense for the year, administrative services provided by Billiken and directors’ fees paid during the year. In the comparative 2007 period the charges for these expenses were minimal.

	·	Advertising and promotion expense increased by $12,719 during the three months ended December 31, 2008, over the same comparative period as a result of the Company expensing its share of the Air Canada Suite License Fee (the “License”) over the expected term of the License and website development and maintenance.

	·	Shareholder relations expense during the three months ended December 31, 2008, was $2,970 (three months ended December 31, 2007 - $19,891). The decrease of $16,921 resulted from less corporate activity and the timing of supplier invoices.

- 20 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

	·	The increase of $30,190 in professional fees during the three months ended December 31, 2008, over the same comparative period in 2007 resulted from increased audit fees and legal accruals during the period.

	·	The increase of $21,000 in consulting fees during the three months ended December 31, 2008, over the comparative period in 2007 resulted from an increase in corporate activity requiring consulting services during the period.

	·	The decrease in capital tax of $38,951 during the three months ended December 31, 2008, over the comparative period in 2007 is a result of an overprovision of capital tax in the three months ended December 31, 2007.

	·	Other expense fluctuations can be related to small variances seen in accounting and corporate services, management fees, travel, occupancy costs, interest and bank charges and insurance.

LIQUIDITY AND CAPITAL RESOURCES

The activities of the Company, principally the acquisition and exploration of properties for metals, are financed through the completion of equity transactions such as equity offerings and the exercise of stock options and warrants. For the periods indicated, the following equity transactions were completed:

Three months ended March 31, 2008

	·	1,072,350 stock options with an exercise price of $0.10 were exercised for cash proceeds of $107,235.
	·	1,310,250 warrants with an exercise price of $0.10 were exercised for cash proceeds of $131,025.

Three months ended June 30, 2008

7,095,750 warrants with an exercise price of $0.10 were exercised for cash proceeds of $709,575.

Three months ended September 30, 2008

No transactions were completed.

Three months ended December 31, 2008

	·	4,700,000 flow-through shares with a price of $0.05 were issued in a private placement for proceeds of $235,000.
	·	1,200,000 flow-through shares with a price of $0.05 were issued in a private placement for proceeds of $60,000.

There is no assurance that future equity capital will be available to the Company in the amounts or at the times desired by the Company or on terms that are acceptable to the Company, if at all. See “Risk Factors” below.

A summary of the funds raised during fiscal 2008 and the stated and actual use of proceeds is outlined below:

- 21 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Date	Amount Raised	Stated Use of Proceeds	Actual Use of Proceeds
January to December 2008	$1,221,685 (1)	General working capital and flow-through commitment (1)	As stated (1)

(1) The Company is in the process of complying with its flow-through contractual obligations with subscribers with respect to the requirements of the Income Tax Act (Canada). The Company is obligated to incur qualifying exploration expenditures in Canada (“CEE”) within 12 months from the effective date of renunciation (December 31, 2008) as defined by the Income Tax Act (Canada). As at December 31, 2008, the Company's remaining commitment with respect to unspent resource expenditures under flow-through common share agreements is $195,284.

As at December 31, 2008, the Company had $3,205,855 in cash, compared with $4,912,931 at December 31, 2007. Included in the cash balance at December 31, 2008, is $195,284 designated for CEE under the terms of the flow-through offerings that were completed during fiscal 2008, as discussed above. Working capital as of December 31, 2008, was $3,417,713 compared with $4,925,170 at December 31, 2007. The decrease was mainly due to exploration expenditures incurred in the amount of $2,009,974 and funds spent on general corporate costs. The decrease was offset by the private placements, exercise of stock options and warrants in the amount of $1,242,835.

The Company has entered into an agreement with IBK on February 10, 2009, whereby IBK will place up to 78,750,000 million common shares of Spider on a best efforts basis for gross proceeds of up to $4,725,000 by way of a private placement.

The Company has no operating revenues and therefore, must utilize its current cash reserves, funds obtained from the exercise of warrants and stock options and other financing transactions to maintain its capacity to meet ongoing discretionary and committed exploration and operating activities.

As of December 31, 2008, the Company had 316,211,767 common shares issued and outstanding, 45,353,333 warrants outstanding which would raise $6,645,417 if exercised in full, and 25,485,018 options outstanding which would raise $3,140,502 if exercised in full. This is not anticipated until the current financial markets recover. See “Trends” above.

The Company’s liquidity risk with financial instruments is minimal as excess cash is invested in investment grade short-term deposit certificates. As of December 31, 2008, the Company’s funds were in two non-interest bearing accounts. The Company did not have any investments as of December 31, 2008.

In addition, sundry receivables are composed of sales tax receivable from government authorities in Canada and deposits held with service providers.

Accounts payable and accrued liabilities decreased to $166,081 at December 31, 2008, compared to $255,306 at December 31, 2007, primarily due to payments related to accruals for exploration expenditures. The Company’s cash at December 31, 2008, is sufficient to pay these liabilities.

- 22 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

The Company’s liabilities and obligations for the following five years as of December 31, 2008, are summarized below:

Liabilities and obligations	Total	1 year	2-4 years	5 years

Accounts payable and accrued liabilities	$166,081	$166,081	n/a	n/a
Flow-through commitment (a)	$195,284	$195,284	n/a	n/a
Mining interests (b)	$2,700,000 for fiscal 2009	2,700,000	n/a	n/a
Corporate expenses (c)	$700,000 per year	$700,000	$2,100,000	$700,000

Total		$3,761,365	$2,100,000	$700,000

	(a)	The Company is committed to spend $195,284 by December 31, 2009, to comply with the government of Canada flow-though regulations with respect to unspent resource expenditures.

	(b)	See “Mineral Exploration Properties” above.

	(c)	The Company plans to incur approximately $700,000 per year in corporate expenses over the next five years. These expenditures are generally not committed and are discretionary in nature. The Company will continue to monitor the global market situation and may adjust its expenditures, depending on future market conditions.

Management believes the Company has sufficient cash on hand to fund its discretionary operating costs and flow-through commitment of $195,284 for fiscal 2009. The Company will require the IBK private placement to be completed in order to meet its discretionary $2.7 million exploration program requirements for fiscal 2009.

The financial position of the Company beyond fiscal 2009 is difficult to predict given the current market conditions. The Company expects to have adequate financial resources in fiscal 2010, given that the Company can reduce its discretionary exploration and operating expenses, but it will have to evaluate its current strategy as it progresses through fiscal 2009 to determine its future direction.

OFF-BALANCE-SHEET ARRANGEMENTS

PROPOSED TRANSACTIONS

- 23 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

TRANSACTIONS WITH RELATED PARTIES

For the year ended December 31, 2008, the Company paid $96,000 (2007 - $66,000) to Nominex Ltd. (“Nominex”), a company controlled by the President and director of the Company, for geological and other services. Included in accounts payable and accrued liabilities is $8,400 (2007 - $16,960) owing to Nominex for management services provided.

During 2007, the Company made contributions of $387,660 to the joint venture between the Company and other joint venture partners, which were expended on behalf of the joint venture by Billiken Management Services Inc. (“Billiken”), the joint venture manager engaged by Spider and other joint venture partners on behalf of the various joint venture managers to execute the approved exploration programs proposed to the joint venture. Billiken ceased to be a related party to the Company during 2007.

The Company paid its Vice President, Richard Hamelin, fees totaling $60,000 for the year ended December 31, 2008. During fiscal 2007, the current Vice President held the position of Chief Financial Officer and was paid consultation fees of $80,000 for the year ended December 31, 2007. In addition, for the year ended December 31, 2008, legal fees in the amount of $109,916 (2007 - $117,486) were paid to a law firm in which the Corporate Secretary, Carmen Diges, is a partner. As at December 31, 2008, this law firm was owed $15,000 (2007 - $60,406) and this amount was included in accounts payable and accrued liabilities.

During the current year, the Company also paid total director fees of $39,000 to its directors as follows: Gregory Roberts $7,000; Bryan Wilson $7,000; Jim Franklin $7,500; Norman Brewster $8,500; and Earl Coleman $9,000.

The Company appointed a new Chief Financial Officer, Carmelo Marrelli, during the year and paid him consultation fees of $20,000 (2007 - $nil) for services rendered. The Chief Financial Officer is a partner in a firm (Marrelli & Drake Corporate Services) providing corporate secretarial and accounting services to Spider. During the year, the Company expensed $70,442 for services rendered by this firm. As at December 31, 2008, this firm was owed $2,680 and this amount was included in accounts payable and accrued liabilities.

For the year ended December 31, 2008, consulting fees of $25,000 (2007 - $nil) were paid to Rocknest Corp., a company controlled by a director of the Company, Bryan Wilson.

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

SUBSEQUENT EVENTS

	(a)	On February 10, 2009, the Company entered into an agreement with IBK Capital Corp., whereby IBK will place up to 78,750,000 million common shares of Spider on a best efforts basis for gross proceeds of up to $4,725,000 by way of a private placement.

	(b)	On March 27, 2009, the Company negotiated an amendment to the Freewest option agreement whereby the option earn-in calls for a $15 million, three-year commitment. As a result of this amendment, the Company no longer is required to prepare a bankable feasibility study within 18

- 24 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

months, as had been called for in the 2005 agreement. Spider now has a $7.5 million commitment over the next three years, of which $2.5 million is required to be spent before March 31, 2010.

CRITICAL ACCOUNTING ESTIMATES

Changes in the accounting estimates in the items discussed above will not have a material impact on the financial position of the Company.

Other items requiring estimates for the year ended December 31, 2008, are future income taxes, accounts payable and accrued liabilities and asset retirement obligation. Changes in the accounting estimates in these items will not have a material impact on the financial position of the Company.

CHANGES IN ACCOUNTING POLICIES

During the year ended December 31, 2008, the Company adopted the following new accounting policies:

Capital Disclosures and Financial Instruments – Disclosures and Presentation

On December 1, 2006, the Canadian Institute of Chartered Accountants (the “CICA”) issued three new accounting standards: Capital Disclosures (Handbook Section 1535), Financial Instruments – Disclosures (Handbook Section 3862), and Financial Instruments – Presentation (Handbook Section 3863). These new standards became effective for the Company on January 1, 2008.

Capital Disclosures

Handbook Section 1535 specifies the disclosure of (i) an entity’s objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance.

Financial Instruments

Handbook Sections 3862 and 3863 replace Handbook Section 3861, Financial Instruments – Disclosure and Presentation, revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks.

- 25 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Amendments to Section 1400 - General Standard of Financial Statement Presentation

In June 2007, the CICA amended Handbook Section 1400, Going Concern, to include additional requirements to assess and disclose an entity’s ability to continue as a going concern. Section 1400 is effective for interim and annual reporting periods beginning on or after January 1, 2008. The adoption of this standard had no impact on the Company's operating results or financial position.

Mining Exploration Costs

On March 27, 2009, the CICA approved EIC 174, “Mining Exploration Costs”. This provides guidance on capitalization of exploration costs related to mining properties in particular, and on impairment of long-lived assets in general. The Company has applied this new abstract for the year ended December 31, 2008 and there was no significant impact on its financial statements as a result of applying this abstract.

Future accounting changes

International Financial Reporting Standards (“IFRS”)

In January 2006, the CICA’s Accounting Standards Board ("AcSB") formally adopted the strategy of replacing Canadian generally accepted accounting principles with IFRS for Canadian enterprises with public accountability. The current conversion timetable calls for financial reporting under IFRS for accounting periods commencing on or after January 1, 2011. On February 13, 2008, the AcSB confirmed that the use of IFRS will be required in 2011 for publicly accountable profit-oriented enterprises. For these entities, IFRS will be required for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.

The Company is currently assessing the impact of IFRS on its financial statements.

Goodwill and Intangible Assets

The Company is currently assessing the impact of this new accounting standard on its financial statements.

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

The CICA issued three new accounting standards in January 2009: Section 1582, “Business Combinations”, Section 1601, “Consolidated Financial Statements” and Section 1602, “Non-Controlling interests”. These new standards will be effective for fiscal years beginning on or after January 1, 2011. Section 1582 replaces section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to IFRS 3 – Business Combinations. Sections 1601 and 1602 together replace section 1600, Consolidated Financial Statements. Section 1601, establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is

- 26 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

equivalent to the corresponding provisions of IFRS lAS 27 - Consolidated and Separate Financial Statements. The Company is in the process of evaluating the requirements of the new standards.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

In January 2009, the CICA approved EIC 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. This guidance clarified that an entity's own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance is applicable to fiscal periods ending on or after January 20, 2009. The Company is continually evaluating the effects of adopting this standard.

MANAGEMENT OF CAPITAL

The Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and development of mineral properties.

The Company considers its capital to be equity, which comprises share capital, warrants, stock options, contributed surplus, and deficit, which at December 31, 2008, totaled $19,413,635 (2007 - $19,060,011).

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company's approach to capital management during the year ended December 31, 2008. The Company is not subject to externally imposed capital requirements.

PROPERTY RISK AND FINANCIAL RISK AFFECTING FINANCIAL INSTRUMENTS

(a) Property risk

The Company's mining interests are the only properties that are currently material to the Company. Unless the Company acquires or develops additional material properties, the Company will be solely dependent upon its current mining interests. If no additional mineral properties are acquired by the Company, any adverse development affecting the Company's mining interests would have a material adverse effect on the Company's financial condition and results of operations.

(b) Financial risk

The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign exchange rate and commodity and equity price risk).

- 27 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.

Credit risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to sundry receivables. The Company has no significant concentration of credit risk arising from operations. Financial instruments included in sundry receivables consist of sales tax receivable due from government authorities in Canada and deposits held with service providers. Sundry receivables are in good standing as of December 31, 2008. Management believes that the credit risk concentration with respect to financial instruments is minimal.

Liquidity risk

Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations when they become due, or can only do so at excessive cost. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2008, the Company had a cash balance of $3,205,855 (2007 - $4,912,931) to settle current liabilities of $166,081 (2007 - $255,306). All of the Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. The Company is also committed to spending approximately $195,284 in exploration expenditures by December 31, 2009. If the Company does not spend these funds in compliance with the government of Canada flow-through regulations, it may be subject to litigation from various counterparties. The Company intends to fulfill all flow-through commitments within the given time constraints.

Market risk

(i) Interest rate risk

(ii) Foreign currency risk

(iii) Price risk

The Company is exposed to price risk with respect to commodity price. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatility. The Company closely monitors commodity prices to determine the appropriate course of action to be taken.

- 28 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Sensitivity analysis

Sundry receivables which are classified for accounting purposes as loans and receivables, are measured at amortized cost. Accounts payable and accrued liabilities are classified for accounting purposes as other financial liabilities, which are measured at amortized cost. Due to the short term nature of these instruments, their carrying value approximates fair value.

Fair value represents the amount that would be exchanged in an arm's length transaction between willing parties and is best evidenced by a quoted market price, if one exists.

Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability depends upon the world market price of valuable minerals. Commodity prices have fluctuated significantly in recent years. There is no assurance that, even though commercial quantities of valuable minerals may be produced in the future, a profitable market will exist for them. As of December 31, 2008, the Company was not a producer of valuable minerals. As a result, commodity price risk may affect the completion of future equity transactions such as equity offerings and the exercise of stock options and warrants. This may also affect the Company's liquidity and its ability to meet its ongoing obligations.

DISCLOSURE OF INTERNAL CONTROLS

Management has established processes, which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the audited financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the audited financial statements, and (ii) the audited financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the audited financial statements.

In contrast to the certificate required under Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (“MI 52-109”), the Company utilizes the Venture Issuer Basic Certificate, which does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in MI 52-109. In particular, the certifying officers filing the Certificate are not making any representations relating to the establishment and maintenance of:

(i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Company’s GAAP.

The Company’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.

- 29 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis DC&P and ICFR as defined in MI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE

The following table sets forth a breakdown of material components of mining interests for the years ended December 31, 2008 and 2007.

Mining interests
	Acquisition costs		Exploration expenditures
	December 31, 2008	December 31, 2007	December 31, 2008	December 31, 2007
	$	$	$	$

Big Daddy Chromite Deposit (formerly know as Freewest)	34,000	34,000	1,769,913	122,146
Diagnos	39	39	66,919	50,319
McFaulds Lake	nil	nil	5,999,624	5,879,811
Spider #1	1,983,760	1,983,760	7,379,737	7,374,737
Wawa	466,173	466,173	1,133,232	912,438

Totals	2,483,972	2,483,972	16,349,425	14,339,451

The following table sets forth a breakdown of material components of administrative expenses of the Company for the years ended December 31, 2008 and 2007.

Administrative Expenses
	Year Ended
	December 31,	December 31,
	2008	2007
	$	$
Accounting and corporate services	80,372	47,484
Shareholder relations	83,319	141,700
Professional fees	99,732	70,200
Management fees	96,469	104,396
Transfer agent, listing and filing fees	23,493	51,654
General and administration	111,375	13,530
Travel	25,967	6,876
Occupancy costs	13,750	5,760
Interest and bank charges	553	1,014
Advertising and promotion	54,792	7,866

- 30 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Consulting fees	122,000	108,938
Insurance	21,510	28,620
Capital tax	(14,164)	24,787
Totals	719,168	612,825

Administrative Expenses
	Three Months Ended
	December 31,	December 31,
	2008	2007
	$	$
Accounting and corporate services	15,552	15,983
Shareholder relations	2,970	19,891
Professional fees	60,000	29,810
Management fees	24,012	22,133
Transfer agent, listing and filing fees	1,427	37,896
General and administration	95,135	5,448
Travel	13,819	5,164
Occupancy costs	3,750	1,875
Interest and bank charges	349	321
Advertising and promotion	17,407	4,688
Consulting fees	47,500	26,500
Insurance	7,560	5,940
Capital tax	(14,164)	24,787
Totals	275,317	200,436

DISCLOSURE OF OUTSTANDING SHARE DATA

On April 9, 2009, Spider had 316,211,767 common shares issued and outstanding.

On April 9, 2009, Spider had the following stock options outstanding:

Number of Options	Exercise Price	Expiry Date

5,600,000	$0.15	December 23, 2009
5,385,018	$0.10	February 8, 2011
1,000,000	$0.10	July 25, 2011
10,900,000	$0.10	October 2, 2013

22,885,018

- 31 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

On April 9, 2009, Spider had the following warrants outstanding:

Number of Warrants	Exercise Price	Expiry Date

30,666,666	$0.18	October 11, 2009
3,066,667	$0.09	October 11, 2009
4,700,000	$0.08	November 27, 2010
470,000	$0.08	November 27, 2010
1,200,000	$0.08	December 30, 2010

40,103,333

IFRS IMPLEMENTATION PLAN

The AcSB has confirmed that IFRS will replace current Canadian GAAP for publicly accountable enterprises, effective for fiscal years beginning on or after January 1, 2011. Accordingly, the Company will report interim and annual financial statements (with comparatives) in accordance with IFRS beginning with the quarter ended March 31, 2011.

The Company has commenced the development of an IFRS implementation plan to prepare for this transition, and is currently in the process of analyzing the key areas where changes to current accounting policies may be required. While an analysis will be required for all current accounting policies, the initial key areas of assessment will include:

	·	Exploration and development expenditures;
	·	Property, plant and equipment (measurement and valuation);
	·	Provisions, including asset retirement obligations;
	·	Stock-based compensation;
	·	Accounting for joint ventures;
	·	Accounting for income taxes; and
	·	First-time adoption of International Financial Reporting Standards (IFRS 1).

As the analysis of each of the key areas progresses, other elements of the Company’s IFRS implementation plan will also be addressed, including: the implication of changes to accounting policies and processes; financial statement note disclosures on information technology; internal controls; contractual arrangements; and employee training. The table below summarizes the expected timing of activities related to the Company’s transition to IFRS.

Initial analysis of key areas for which changes to accounting policies may be required.	In progress, expected to be complete during Q2 2009
Detailed analysis of all relevant IFRS requirements and identification of areas requiring accounting policy changes or those with accounting policy alternatives.	Throughout 2009
Assessment of first-time adoption (IFRS 1) requirements and alternatives.	Throughout 2009

- 32 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Final determination of changes to accounting policies and choices to be made with respect to first-time adoption alternatives	Q4 2009 – Q1 2010
Resolution of the accounting policy change implications on information technology, internal controls and contractual arrangements	Q4 2009 – Q2 2010
Management and employee education and training	Throughout the transition process
Quantification of the Financial Statement impact of changes in accounting policies	Throughout 2010

RISKS AND UNCERTAINTIES

An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Such investment should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. Prospective investors should carefully consider the risk factors described below.

Additional Funding Requirements

Mineral Exploration and Exploitation

Mineral exploration and exploitation involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explosions, tailings impoundment failures, cave-ins, landslides and the inability to obtain adequate machinery, equipment or labour are some of the risks involved in mineral exploration and exploitation activities. The Company has relied on and may continue to rely on consultants and others for mineral exploration and exploitation expertise. Substantial expenditures are required to establish mineral reserves and resources through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of some properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining, or to upgrade existing infrastructure. There can be no assurance that the funds required to exploit any mineral reserves and resources discovered by the Company will be obtained on a timely basis or at all. The economics of exploiting mineral reserves and resources discovered by the Company are affected by many factors, many outside the control of the Company, including the cost of operations, variations in the grade of ore mined and metals recovered, price fluctuations in the metal markets, costs of processing equipment, and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. There can be no assurance that the Company’s mineral exploration and exploitation activities will be successful.

- 33 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Uninsurable Risks

Environmental Regulation and Liability

Regulations and Permits

The Company’s activities are subject to wide variety of laws and regulations governing health and worker safety, employment standards, waste disposal, protection of the environment, protection of historic and archaeological sites, mine development and protection of endangered and protected species and other matters. The Company is required to have a wide variety of permits from governmental and regulatory authorities to carry out its activities. These permits relate to virtually every aspect of the Company’s exploration activities. Changes in these laws and regulations or changes in their enforcement or interpretation could result in changes in legal requirements or in the terms of the Company’s permits that could have a significant adverse impact on the Company’s existing or future operations or projects. Obtaining permits can be a complex, time-consuming process.

Dependence on Key Employees

The Company’s business and operations are dependent on retaining the services of a small number of key employees. The success of the Company is, and will continue to be, to a significant extent, dependent on the expertise and experience of these employees. The loss of one or more of these employees could have a materially adverse effect on the Company. The Company does not maintain insurance on any of its key employees.

- 34 -

Spider Resources Inc.
Management Discussion & Analysis	Year Ended December 31, 2008

Potential Dilution

The issue of common shares of the Company upon the exercise of the options and warrants will dilute the ownership interest of the Company’s current shareholders. The Company may also issue additional option and warrants or additional common shares from time to time in the future. If it does so, the ownership interest of the Company’s then current shareholders could also be diluted.

Current Global Financial Conditions

Securities of mining and mineral exploration companies, including the common shares of the Company, have experienced substantial volatility in the past, and especially during the fourth quarter of 2008 and early 2009, often based on factors unrelated to the financial performance or prospects of the companies involved. These factors include macroeconomic developments in Canada and globally, and market perceptions of the attractiveness of particular industries. The price of the securities of the Company is also significantly affected by short-term changes in commodity prices, base and precious metal prices or other mineral prices, currency exchange fluctuation and the political environment in the countries in which the Company does business.

Securities Act Rule 801 (Rights Offering)	⃞

Securities Act Rule 802 (Exchange Offer)	⊠

Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer)	⃞

Exchange Act Rule 14d-1(c) (Third Party Tender Offer)	⃞

Exchange Act Rule 14e-2(d) (Subject Company Response)	⃞

	Ø	Combination creates value for both sets of shareholders by securing control of their respective assets, and in particular a majority interest in the Big Daddy deposit with the ongoing right to operate the continued exploration, development and mining activities thereon.

	Ø	The combined entity will hold a majority or fully-owned position in each of the Spider’s mineral projects and will have the flexibility to develop each of such projects to maximize value of its combined shareholder base.

	Ø	The ongoing combined company will hold a current 53% interest in the Big Daddy deposit, with the option to earn a further 7% interest to achieve a 60% interest in the project.

	Ø	The Spider shareholders will continue to benefit from the potential to realize increased value from the development of one of the most significant chromite projects in North America.

	Ø	Upon completion of the proposed amalgamation, the board of directors of KWG will be reconstituted to consist of six members, three of whom are currently directors of KWG; namely, Bruce Reid, Frank Smeenk and Rene Galipeau and the remaining directors being Neil Novak, Norman Brewster and Bryan Wilson who are currently directors of Spider.

	Ø	The new board of directors of KWG is expected to maintain the current executive officers of KWG and to appoint Neil Novak as President of KWG and Frank Smeenk as Executive Chairman of KWG.

		(i) such holder shall cease to be a Spider Shareholder and the name of such holder shall be removed from the central securities register of holders of Spider Shares;

		(ii) KWG shall issue from the treasury and cause to be delivered to such Spider Shareholder the KWG Shares to which such holder is entitled as aforesaid and the name of such holder shall be added to the central securities register of holders of KWG Shares showing such holder as the registered holder of the KWG Shares so issued; and

		(iii) each Spider Share so exchanged shall be cancelled and an equivalent number of KWG Sub Shares shall be issued to KWG;

	(d)	all KWG Sub Shares shall be converted on a share for share basis into fully paid and non-assessable Amalco Shares on the basis of one (1) fully paid and non-assessable Amalco Share for each one (1) KWG Sub Share;
	(e)	Amalco shall be a wholly-owned subsidiary of KWG;
	(f)	Amalco will have, as its articles, articles substantially in the form of the articles of KWG Sub, and will have, as its by-laws, the by-laws of KWG Sub;
	(g)	the property, rights and interests of each of KWG Sub and Spider will continue to be the property, rights and interests of Amalco; and
	(h)	the initial board of directors of Amalco will be comprised of the individuals set forth in Schedule “E” to the Combination Agreement.

		provided for in the Combination Agreement with respect to a Spider Alternative Proposal, if Spider shall have failed, after being requested by KWG in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated in the Combination Agreement as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from KWG; (vi) if any Spider Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid); (vii) if Spider shall not have mailed this Information Circular to the Spider Shareholders on or before June 21, 2010 (provided that KWG shall have materially fulfilled its obligations with respect to the information to be provided by KWG to Spider for inclusion in this Information Circular, as described in greater detail below); (viii) if Spider shall have failed to hold the Meeting on or before July 14, 2010 (unless such failure results from an adjournment of the Meeting in accordance with the terms of the Combination Agreement); or (ix) if there is an intentional breach of the covenants by Spider or any of its directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;
	(d)	by Spider: (i) if the KWG Board shall have made a Change of KWG Recommendation; (ii) if the KWG Board accepts, approves or recommends a KWG Alternative Proposal; (iii) if KWG enters into a letter of intent or definitive written agreement with respect to a KWG Alternative Proposal; (iv) except as otherwise provided for in the Combination Agreement with respect to a KWG Alternative Proposal, if KWG shall have failed, after being requested by Spider in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated in the Combination Agreement as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from Spider; (v) if any KWG Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid); or (vi) if there is an intentional breach of the covenants set forth in the Combination Agreement by KWG, any of its subsidiaries or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;
	(e)	by KWG or by Spider if the Amalgamation shall not have been completed by the Completion Deadline; provided however, (i) there is no intentional breach of the covenants set forth in the Combination Agreement of such terminating party, any of its subsidiaries, if any, or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, before the Completion Deadline, and (ii) if the Amalgamation has not been completed by the Completion Deadline because the Meeting has not been held due to the fault of Spider (the Parties acknowledging that Spider is not at fault in the event that the Meeting has not been held due to an order of a Governmental Entity), then Spider shall not be entitled to terminate the Combination Agreement;
	(f)	by KWG in order to enter into a letter of intent or definitive agreement with respect to a KWG Superior Proposal or otherwise accept, approve or recommend a KWG Superior Proposal, subject to compliance by KWG with the non-solicitation and notice requirements set forth in the Combination Agreement;
	(g)	by Spider in order to enter into a letter of intent or definitive agreement with respect to a Spider Superior Proposal or otherwise accept, approve or recommend a Spider Superior Proposal, subject to compliance by Spider with the non-solicitation and notice requirements set forth in the Combination Agreement; and
	(h)	by KWG or Spider, as the case may be, if KWG or Spider, as applicable, shall have breached or not performed any material covenant when required to be performed by it under the Combination Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by the breaching or non performing party in accordance with the terms of the Combination Agreement) or if any representation or warranty of KWG or Spider, as applicable, shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on KWG or Spider, as applicable, or have a material adverse effect on the ability of KWG or Spider, as applicable, to complete the Amalgamation.

	Document
	Number	Description

	1.	Management Information Circular of Spider Resources Inc. dated June 11, 2010

	2.	Letter of Transmittal

	3.	Form of Proxy

	4.	Press Release, dated June 14, 2010

Toronto, Ontario June 11, 2010	By Order of the Board Of Directors
	(Signed) Neil Novak President and Chief Executive Officer

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS		5
GLOSSARY OF TERMS		11
SUMMARY		16
MANAGEMENT INFORMATION CIRCULAR		28
PART I GENERAL PROXY MATERIALS		30
	Solicitation of Proxies by Management	30
	Appointment of Proxy	30
	Revocation of Proxy	30
	General	31
	Advice To Beneficial Shareholders	31
	Record Date and Right To Vote	32
	Voting Securities and Principal Holders Thereof	32
PART II PARTICULARS OF MATTERS TO BE ACTED UPON		33
	The Amalgamation	33
	Background to the Amalgamation	33
	Reasons for the Amalgamation	33
	Amalgamation	35
	Business Conducted by KWG after the Amalgamation	55
	Implementation of the Amalgamation	55
	Procedure for Exchange of Share Certificates by Shareholders	55
	Certain Canadian Federal Income Tax Considerations	56
	Securities Law Matters	58
	Regulatory Approvals and Filings	58
	Fairness Opinion	58
	Approval of Amalgamation	60
	Rights of Dissenting Shareholders	60
	Ratification of By-Law Number 1	61
PART III INFORMATION CONCERNING KWG		63
	Information Incorporated by Reference	63
	KWG	63
	Intercorporate Relationships	63
	Business of KWG	64
	General Development of the Business	65
	Three-Year History	66
	Principal Property	69
	Big Daddy Project	69
	Other Properties	77
	Management’s Discussion and Analysis	78
	Disclosure of Outstanding Security Data	91
	Effect of Amalgamation on Financial Condition, Results of Operations and Cash Flows	92
	Description of Securities	92
	Dividend Record	94
	Consolidated Capitalization	95
	Prior Sales	95
	Trading Price and Volume	97
	Principal Shareholders	98
	Directors and Executive Officers	98
	Biographies of Directors and Key Employees	100
	Bankruptcy, Insolvency and Cease Trade Orders	101
	Conflicts of Interest	102

	Executive Compensation	103
	Indebtedness of Directors and Executive Officers	109
	Audit Committee Disclosure	109
	Corporate Governance Disclosure	110
	Risk Factors	112
	Legal Proceedings and Regulatory Actions	118
	Interest of Management and Others in Material Transactions	118
	Auditor, Transfer Agent and Registrar	118
	Material Contracts	118
	Interests of Experts	118
	Information Concerning KWG Sub	119
PART IV INFORMATION CONCERNING SPIDER		120
	Spider	120
	Intercorporate Relationships	120
	General Development of the Business	120
	Description of the Business	123
	Spider Audit Committee	127
	External Auditor Service Fees	128
	Controls and Procedures	128
	Legal Proceedings and Regulatory Actions	128
	Directors and Executive Officers	128
	Biographies of Directors and Key Employees	131
	Cease Trade Orders, Penalties, Sanctions and Personal Bankruptcies	132
	Spider Compensation Committee	133
	Statement of Executive Compensation	134
	Equity Compensation Plan Information	141
	Management Contracts	141
	Interest of Certain Persons and Companies in Matters to be Acted Upon	141
	Interest of Informed Persons in Material Transactions	141
	Conflicts of Interest	141
	Authorized Capital	142
	Consolidated Capitalization	142
	Indebtedness of Directors and Executive Officers	142
	Prior Sales of Spider Shares	142
	Price Range and Trading Volume	143
	Material Contracts	143
	Dividend Policy	143
	Auditors and Transfer Agent	143
	Experts	144
	Interests of Experts	144
	Continuous Reporting Obligations to Investors	144
	Additional Information	144
PART V INFORMATION CONCERNING KWG AFTER THE AMALGAMATION		145
	The Amalgamation	145
	Intercorporate Relationships	145
	Business of KWG After Amalgamation	145
	Principal Property	145
	Selected Pro Forma Consolidated Financial Information	146
	Principal Shareholders	148
	Directors and Executive Officers of KWG After Amalgamation	148
	Cease Trade Orders, Penalties, Sanctions and Personal Bankruptcies	151
	Conflicts of Interest	152
	Indebtedness of Directors and Executive Officers	152
	Audit Committee Disclosure	152
	Description of Share Capital	153
	Executive Compensation	154
	Pro Forma Consolidated Capitalization	154

	(a)	strong combined management team;

	(b)	enhanced market liquidity as a result of a significantly larger market capitalization and expanded shareholder base providing greater access to capital;

	(c)	rationalization of overhead costs and administrative expenses related to maintaining two separate public companies reducing ongoing costs; and

	(d)	controlling interests in other early stage development prospects in which both Spider and KWG share interests prior to the Amalgamation.

	(a)	offered Spider Shareholders the ability to maximize the exploration and potential development of the Big Daddy Project, as well as its other assets;

	(b)	was the best alternative available to maximize shareholder value and opportunities for Spider Shareholders; and

	(c)	was in the best interests of Spider Shareholders.

	(a)	the Amalgamation and the terms and conditions of the Combination Agreement and the unanimous recommendation of the Spider Special Committee that the Spider Board recommend that Spider Shareholders vote in favour of the Amalgamation;

	(b)	the Fairness Opinion, a copy of which is attached as Schedule “E” to this Information Circular, which concludes that, based upon and subject to the scope of review, assumptions, limitations and qualifications set forth in the opinion, as of June 11, 2010, the consideration to be received by the Spider Shareholders (other than KWG and its affiliates) under the Amalgamation is fair, from a financial point of view, to the Spider Shareholders (other than KWG and its affiliates);

	(c)	the purpose and benefits of the Amalgamation;

	(d)	the risks associated with the Amalgamation and the alternatives available to Spider;

	(e)	that the Amalgamation will enable Spider Shareholders to retain their investment in a publicly-traded corporation on a recognized exchange with an enhanced mineral asset base which will include a majority interest in the Big Daddy Project;

	(f)	information concerning the financial condition, results of operations, business, plans and prospects of Spider and KWG and the resulting potential for enhanced business efficiency, management effectiveness and financial results of KWG on a consolidated basis;

	(g)	the Cliffs Offer and the unanimous recommendation of the Spider Special Committee that the Spider Board recommend that Spider Shareholders reject the Cliffs Offer; and

	(h)	the opinion prepared and verbally delivered by TD Securities to the Spider Special Committee concluding that, based upon and subject to the expressed scope of review and certain assumptions, limitations and qualifications, as of June 10, 2010, the consideration to be received by the Spider Shareholders (other than Cliffs and its affiliates) under the Cliffs Offer is inadequate, from a financial point of view, to the Spider Shareholders (other than Cliffs and its affiliates).

	(a)	unanimously determined that the Amalgamation is fair from a financial point of view to the Spider Shareholders;
	(b)	unanimously determined that the Amalgamation is in the best interests of Spider and the Spider Shareholders; and
	(c)	unanimously recommended that the Spider Board recommend that Spider Shareholders vote in favour of the Amalgamation.

	(a)	KWG Sub and Spider will amalgamate and continue as one company under the terms and conditions of the Combination Agreement and articles and by-laws of KWG Sub;
	(b)	each Spider Share held by KWG Sub shall be cancelled without any repayment of capital in respect thereof;
	(c)	each outstanding Spider Share (other than Spider Shares held by a Spider Shareholder who has validly exercised its Dissent Rights and who is ultimately entitled to be paid fair value for its Spider Shares and other than the Spider Shares beneficially owned by KWG Sub) will be exchanged for that number of KWG Shares equal to the Exchange Ratio, and:

	(a)	by mutual written agreement between Spider and KWG;
	(b)	if any condition to completion of the Amalgamation set out in the Combination Agreement is not satisfied or waived by the party to whom it is of benefit, subject to the notice and cure provisions of the Combination Agreement;
	(c)	by KWG, (i) if the Spider Board fails to recommend to Spider Shareholders that they vote in favour of the Amalgamation and the Special Resolution and the other transactions contemplated in the Combination Agreement, except as expressly permitted in the Combination Agreement with respect to a Spider Alternative Proposal; (ii) if the Spider Board shall have made a Change of Spider Recommendation; (iii) if the Spider Board accepts, approves or recommends a Spider Alternative Proposal; (iv) if Spider enters into a letter of intent or definitive written agreement with respect to a Spider Superior Proposal; (v) except as otherwise

	As Reported
	KWG Resources Inc.			Spider Resources Inc.			Pro forma Adjustments			Notes		Consolidated
ASSETS
Current
Cash & cash equivalents		3,712,118			3,731,461			(501,987	)		3(a)		6,941,592
Accounts receivable		790,192			502,971			(5,412	)		3(a)		1,116,975
								(170,776	)		3(b)
Temporary investments		202,611			-			(30,000	)		3(c)		172,611
Prepaid expenses		19,945			48,084			-					68,029
Total current assets		4,724,866			4,282,516			(708,175	)				8,299,207

Capital assets		60,592			-			(60,592	)		3(a)		-
Mining assets		25,767,877			22,928,707			(12,452,975	)		3(a)		122,773,125
								86,529,516			3(e)
TOTAL ASSETS		30,553,335			27,211,223			73,307,774					131,072,332

LIABILITIES
Current
Accounts payable and accrued liabilities		7,402,736			199,358			(1,000,000	)		3(a)		6,976,847
								(125,247	)		3(b)
								500,000			3(d)
Total current liabilities		7,402,736			199,358			(625,247	)				6,976,847

Future income tax liability		-			3,415,306			23,085,000			3(e)		26,500,306

SHAREHOLDERS’ EQUITY

Share Capital		21,287,218			30,998,087			(12,530,897	)		3(a)		79,986,666
								71,230,345			3(f)
								(30,998,087	)		3(g)
Warrants, options & compensation options		4,941,001			5,982,916			15,295,730			3(h)		20,236,731
								(5,982,916	)		3(g)
Contributed surplus		3,326,255			3,881,724			(3,881,724	)		3(g)		3,326,255
Deficit		(6,215,690	)		(17,266,168	)		509,931			3(a)		(5,751,288	)
								(45,529	)		3(b)
								17,266,168			3(g)
Accumulated other comprehensive loss		(188,185	)		-			(15,000	)		3(c)		(203,185	)
Total shareholders’ equity		23,150,599			24,726,659			50,848,021					97,595,179
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		30,553,335			27,211,223			73,307,774					131,072,332

Name	Number of Spider Shares Owned, Directed or Controlled, Directly or Indirectly	Percentage of Outstanding Spider Shares
Joe Dwek Management Consultants Inc. (“JDM”)	74,599,036(1)	13.77%(2)

	(1)	the Amalgamation must be approved by a Special Resolution of the Spider Shareholders voting at the Meeting;
	(2)	the Amalgamation must be approved by KWG as the sole shareholder of KWG Sub; and
	(3)	all conditions precedent to the Amalgamation, as set forth in the Combination Agreement (including receipt of all regulatory approvals), must be satisfied or waived by the appropriate party.

(a)	the Spider Shareholder Approval shall have been obtained at the Meeting in accordance with the provisions of the CBCA and the requirements of any applicable regulatory authority;
(b)	there shall not be in force any Laws, ruling, order or decree, and there shall not have been any action taken under any Laws or by any Governmental Entity or other regulatory authority, that makes it illegal or otherwise directly or indirectly restrains, enjoins or prohibits the consummation of the Amalgamation in accordance with the terms of the Combination Agreement or results or could reasonably be expected to result in a judgment, order, decree or assessment of damages, directly or indirectly, relating to the Amalgamation that has, or could reasonably be expected to have, a Material Adverse Effect on Spider or KWG;
(c)	(A) the KWG Shares shall be listed and posted for trading on the TSXV; (B) the TSXV shall have conditionally approved the listing thereon, subject to official notice of issuance, of the KWG Shares to be issued pursuant to the Amalgamation or as otherwise contemplated in the Combination Agreement (including the KWG Shares which are issuable upon the exercise of the New KWG Options and the Spider Options (which have not been exchanged for New KWG Options and which have not expired), Spider Warrants, Spider Unit Compensation Options and Spider Unit Warrants (underlying such Spider Unit Compensation Options) outstanding immediately following completion of the Amalgamation as of the Effective Date, or as soon as possible thereafter, and (C) the TSXV shall have, if required, accepted notice for filing of all transactions of each of KWG and Spider contemplated in the Combination Agreement or necessary to complete the Amalgamation, subject only to compliance with the usual requirements of the TSXV, as applicable;
(d)	(A) all consents, waivers, permits, exemptions, orders and approvals of, and any registrations and filings with, any Governmental Entity, in connection with, or required to permit, the completion of the Amalgamation including, without limitation, the laws of any jurisdiction which KWG and Spider reasonably determine to be applicable, and (B) all third person and other consents, waivers, permits, exemptions, orders, approvals, agreements and amendments and modifications to agreements, indentures or arrangements, the failure of which to obtain or the non-expiry of which would, or could reasonably be expected to have, a Material Adverse Effect on Spider or KWG or materially impede the completion of the Amalgamation, shall have been obtained or received on terms that are reasonably satisfactory to each Party;
(e)	the KWG Shares to be issued pursuant to the Amalgamation shall be exempt from registration requirements under Rule 802 under the 1933 Act;
(f)	the Spinoff shall have been completed;
(g)	the Combination Agreement shall not have been terminated pursuant to the terms of the Combination Agreement; and
(h)	the Amalgamation shall have been completed on or before the Completion Deadline.

	(a)	the representations and warranties made by KWG in the Combination Agreement that are qualified by the expression “Material Adverse Change” or “Material Adverse Effect” shall be true and correct as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), and all other representations and warranties made by KWG in the Combination Agreement shall be true and correct in all material respects as of the Effective Date as if made on and as of such date (except to the extent that such representations and warranties speak as of an earlier date, in which event such representations and warranties shall be true and correct as of such earlier date), in either case, except where any failures or breaches of representations and warranties would not either individually or in the aggregate, in the reasonable judgment of Spider, have a Material Adverse Effect on KWG. No representation or warranty made by KWG shall be deemed not to be true and correct if the facts or circumstances which make such representation or warranty untrue or incorrect are disclosed or referred to, or provided for, or stated to be exceptions under the Combination Agreement;
	(b)	from the date of the Combination Agreement to the Effective Date, there shall not have occurred a Material Adverse Change in respect of KWG;
	(c)	KWG shall have complied in all material respects with its covenants set forth in the Combination Agreement;
	(d)	the KWG Board shall have adopted all necessary resolutions and all other necessary corporate action shall have been taken by KWG and KWG Sub to permit the consummation of the Amalgamation;
	(e)	the KWG Board shall not have effected a Change of KWG Recommendation; and
	(f)	a Flip-in Event for purposes of the KWG Rights Plan shall not have occurred.

		(vi) adopt resolutions or enter into any agreement providing for the amalgamation, merger, consolidation, reorganization, liquidation, dissolution or any other extraordinary transaction in respect of itself, or adopt any plan of liquidation;
		(vii) acquire or agree to acquire any corporation, partnership, business corporation (or other entity or material interest therein) or division of any corporation or other entity, or make any investment;
		(viii) (A) satisfy or settle any claim or dispute, except such as have been included in the interim financial statements of Spider for the three months ended March 31, 2010 and which are, individually or in the aggregate, in an amount in excess of $150,000; (B) relinquish any contractual rights that are, individually or in the aggregate, in an amount in excess of $150,000; or (C) enter into any interest rate, currency or commodity swaps, hedges, caps, collars, forward sales or other similar financial instruments;
		(ix) acquire any material assets, incur any indebtedness for borrowed money or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for, the obligations of any other individual or entity, or make any loans or advances, authorize, recommend or propose any release or relinquishment of any material contractual right, waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document, enter into or terminate any hedges, swaps or other similar financial instruments or transactions, enter into any agreements with its directors or officers or their respective affiliates, or authorize, propose, permit or agree to any of the above;
		(x) enter into new commitments of a capital expenditure nature or incur any new contingent liabilities other than (A) ordinary course expenditures, (B) expenditures required by applicable Laws, (C) expenditures made in connection with transactions contemplated in the Combination Agreement, and (D) capital expenditures required to prevent the occurrence of a Material Adverse Effect;
		(xi) create any new obligations or liabilities or modify or in any manner amend any existing obligations and liabilities to pay any amount, including loan amounts, to its officers, directors, employees and consultants, other than for salary, bonuses under its existing bonus arrangements and directors’ fees in the ordinary course, in each case in amounts consistent with historic practices and obligations or liabilities or arising in the ordinary and regular course of business;
		(xii) adopt or amend or make any contribution to any bonus, profit sharing, option, deferred compensation, insurance, incentive compensation, other compensation or other similar plan, agreement, trust, fund or arrangements for the benefit of employees, except as is necessary to comply with applicable Laws or with respect to existing provisions of any such plans, programs, arrangements or agreements;
		(xiii) take actions that could reasonably be expected to be prejudicial to KWG’s interest in the business, property or assets of Spider following the closing of the Amalgamation; or
		(xiv) except as required by Canadian GAAP or any applicable Laws, make any changes to the existing accounting practices of Spider or make any material tax election inconsistent with past practice.
	(f)	Employment Agreements. Except where the prior intention to do so has been disclosed by Spider, Spider shall not, without the prior written consent of KWG, enter into or modify any employment, consulting, severance, collective bargaining or similar agreement, policy or arrangement with, or grant any bonus, salary increase, option to purchase shares, pension or supplemental pension benefit, profit sharing, retirement allowance, deferred compensation, incentive compensation, severance, change of control or termination pay to, or make any loan to, any officer, director, employee or consultant of Spider.
	(g)	Insurance. Spider shall use its commercially reasonable efforts to cause its current insurance (or reinsurance) policies not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and re-insurance companies of internationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect.
	(h)	Certain Actions. Spider shall:

		(i) not take any action, or refrain from taking any action (subject to commercially reasonable efforts), or permit any action to be taken or not taken, inconsistent with the provisions of the Combination Agreement or which would reasonably be expected to materially impede the completion of the transactions contemplated by the Combination Agreement or would render, or that could reasonably be expected to render, any representation or warranty made by Spider in the Combination Agreement untrue or inaccurate in any material respect at any time on or before the Effective Date if then made, or which would or could have a Material Adverse Effect on Spider; and
		(ii) promptly notify KWG of (A) any Material Adverse Change or Material Adverse Effect, or any change, event, occurrence or state of facts that could reasonably be expected to become a Material Adverse Change or to have a Material Adverse Effect, in respect of the business or in the conduct of the business of Spider, (B) any material Governmental Entity or third person complaints, investigations or hearings (or communications indicating that the same may be contemplated), (C) any breach by Spider of any covenant or agreement contained in the Combination Agreement, and (D) any event occurring subsequent to the date of the Combination Agreement that would render any representation or warranty of Spider contained in the Combination Agreement, if made on or as of the date of such event or the Effective Date, to be untrue or inaccurate in any material respect.
	(i)	No Compromise. Spider shall not settle or compromise any claim brought by any present, former or purported holder of any securities of Spider in connection with the transactions contemplated by the Combination Agreement prior to the Effective Time without the prior written consent of KWG.
	(j)	Contractual Obligations. Without the prior written agreement of KWG, Spider shall not enter into, renew or modify in any respect any material contract, agreement, lease, commitment or arrangement to which Spider is a party or by which it is bound, except insofar as may be necessary to permit or provide for the completion of the Amalgamation or where to do so would not have a Material Adverse Effect.
	(k)	Satisfaction of Conditions. Spider shall use all commercially reasonable efforts to satisfy, or cause to be satisfied, all conditions precedent to its obligations to the extent that the same is within its control and to take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under all applicable Laws to complete the transactions contemplated by the Combination Agreement, including using its commercially reasonable efforts to:
		(i) obtain the Spider Shareholder Approval in accordance with the provisions of the CBCA and the requirements of any applicable regulatory authority;
		(ii) obtain all other consents, approvals and authorizations as are required to be obtained by Spider under any applicable Laws or from any Governmental Entity or under the rules or policies of the TSXV that would, if not obtained, materially impede the completion of the transactions contemplated by the Combination Agreement or have a Material Adverse Effect on Spider;
		(iii) effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the transactions contemplated by the Combination Agreement and participate and appear in any proceedings of any party to the Combination Agreement before any Governmental Entity;
		(iv) oppose, lift or rescind any injunction or restraining order or other order or action challenging or affecting the Combination Agreement, the transactions contemplated by the Combination Agreement or seeking to enjoin or delay, or otherwise adversely affecting the ability of the parties to the Combination Agreement to consummate, the transactions contemplated by the Combination Agreement, subject to the Spider Board determining in good faith after receiving advice from outside legal counsel that taking such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided that, immediately upon receipt of such advice, Spider advises KWG in writing that it has received such advice and provides written details thereof to KWG;
		(v) fulfill all conditions and satisfy all provisions of the Combination Agreement and the Amalgamation required to be fulfilled or satisfied by Spider; and
		(vi) cooperate with KWG in connection with the performance by it of its obligations under the Combination Agreement, provided however that the foregoing shall not be construed to obligate Spider to pay or cause to be paid any monies to cause such performance to occur, other than as contemplated in the Combination Agreement.

		(i) issue, sell, grant, pledge, lease, dispose of, encumber or create any Encumbrance on or agree to issue, sell, grant, pledge, lease, dispose of, or encumber or create any Encumbrance on any shares of, or any options, warrants, calls, conversion privileges or rights of any kind to acquire any shares of KWG other than:
			(A) the issue of KWG Shares pursuant to the valid exercise of the KWG Options, and KWG Warrants issued and outstanding on the date of the Combination Agreement in accordance with their terms as of the date of the Combination Agreement; or
			(B) pursuant to the Permitted KWG Flow-Through Conversion;
		(ii) other than pursuant to obligations or rights under existing contracts, agreements and commitments (to the extent such rights have been exercised or initiated by other Persons) or pursuant to the Spinoff, sell, lease, encumber or otherwise dispose of any property or assets or enter into any agreement or commitment in respect of any of the foregoing except where to do so would not have a Material Adverse Effect;
		(iii) reduce its stated capital, or split, combine or reclassify any of the shares of KWG or, other than in connection with the Spinoff, declare, set aside or pay any dividend or other distribution payable in cash, securities, property or otherwise with respect to the KWG Shares;
		(iv) redeem, purchase or offer to purchase, or permit any of the KWG Subsidiaries to redeem, purchase or offer to purchase, any KWG Shares and, other than pursuant to the KWG Stock Option Plan, any options or obligations or rights under existing contracts, agreements and commitments;
		(v) adopt resolutions or enter into any agreement providing for the amalgamation, merger, consolidation, reorganization, liquidation, dissolution or any other extraordinary transaction in respect of itself, or adopt any plan of liquidation;
		(vi) acquire or agree to acquire any corporation, partnership, business corporation (or other entity or material interest therein) or division of any corporation or other entity, or make any investment;
		(vii) (A)satisfy or settle any claim or dispute, except such as have been included in the interim consolidated financial statements of KWG for the three months ended March 31, 2010 and which are, individually or in the aggregate, in an amount in excess of $150,000; (B) relinquish any contractual rights that are, individually or in the aggregate, in an amount in excess of $150,000; or (C) enter into any interest rate, currency or commodity swaps, hedges, caps, collars, forward sales or other similar financial instruments;
		(viii) amend or propose to amend the articles or by-laws of KWG or any of the KWG Subsidiaries as they exist at the date of the Combination Agreement;
		(ix) acquire any material assets, incur any indebtedness for borrowed money or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise as an accommodation become responsible for, the obligations of any other individual or entity, or make any loans or advances, authorize, recommend or propose any release or relinquishment of any material contractual right, waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document, enter into or terminate any hedges, swaps or other similar financial instruments or transactions, enter into any agreements with its directors or officers or their respective affiliates, or authorize, propose, permit or agree to any of the above;
		(x) enter into new commitments of a capital expenditure nature or incur any new contingent liabilities other than (A) ordinary course expenditures, (B) expenditures required by applicable Laws, (C) expenditures made in connection with transactions contemplated in the Combination Agreement, and (D) capital expenditures required to prevent the occurrence of a Material Adverse Effect;
		(xi) create any new obligations or liabilities or modify or in any manner amend any existing obligations and liabilities to pay any amount, including loan amounts, to its or their officers, directors, employees and consultants, other than for salary, bonuses under its or their existing bonus arrangements and directors’ fees in the ordinary course, in each case in amounts consistent with historic practices and obligations or liabilities or arising in the ordinary and regular course of business;

		a party or by which it is bound, except insofar as may be necessary to permit or provide for the completion of the Amalgamation or where to do so would not have a Material Adverse Effect.
	(h)	Satisfaction of Conditions. KWG shall use all commercially reasonable efforts to satisfy, or cause to be satisfied, all of the conditions precedent to its obligations to the extent the same is within its control and to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable under all applicable Laws to complete the transactions contemplated by the Combination Agreement, including using its commercially reasonable efforts to:
		(i) obtain all consents, approvals and authorizations as are required to be obtained by KWG or any of the KWG Subsidiaries under any applicable Laws or from any Governmental Entity or under the rules or policies of the TSXV that would, if not obtained, materially impede the completion of the transactions contemplated by the Combination Agreement or have a Material Adverse Effect on KWG;
		(ii) effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the transactions contemplated by the Combination Agreement and participate, and appear in any proceedings of, any party hereto before any Governmental Entity;
		(iii) oppose, lift or rescind any injunction or restraining order or other order or action challenging or affecting the Combination Agreement, the transactions contemplated by the Combination Agreement or seeking to enjoin or delay, or otherwise adversely affecting the ability of the parties to the Combination Agreement to consummate, the transactions contemplated by the Combination Agreement, subject to the KWG Board determining in good faith after receiving advice from outside legal counsel that taking such action would be inconsistent with the fiduciary duties of such directors under applicable Laws, and provided that, immediately upon receipt of such advice, KWG advises Spider in writing that it has received such advice and provides written details thereof to Spider;
		(iv) fulfill all conditions and satisfy all provisions of the Combination Agreement and the Amalgamation required to be fulfilled or satisfied by it, and
		(v) cooperate with Spider in connection with the performance by Spider of its obligations under the Combination Agreement, provided however that the foregoing shall not be construed to obligate KWG to pay or cause to be paid any monies to cause such performance to occur, other than as contemplated in the Combination Agreement.
	(i)	Cooperation. KWG shall make, or cooperate as necessary in the making of, all necessary filings and applications under all applicable Laws required in connection with the transactions contemplated by the Combination Agreement and take all reasonable action necessary to be in compliance with such Laws.
	(j)	Representations. KWG shall use its commercially reasonable efforts to conduct its affairs and to cause the KWG Subsidiaries to conduct their affairs so that all of the representations and warranties of KWG contained in the Combination Agreement shall be true and correct on and as of the Effective Date as if made on and as of such date.
	(k)	Confirmatory Review. Subject to applicable Laws, until the Effective Date, KWG shall continue to make available and cause to be made available to Spider and the agents and advisors thereto all documents, agreements, corporate records and minute books as may be necessary to enable Spider to effect a thorough examination of KWG and the KWG Subsidiaries and the business, properties and financial status thereof, and shall cooperate with Spider in securing access for Spider to any documents, agreements, corporate records or minute books not in the possession or under the control of KWG. Subject to applicable Laws, upon reasonable notice, until the Effective Date, KWG shall, and shall cause the KWG Subsidiaries to, afford officers, employees, counsel, accountants and other authorized representatives and advisors of Spider reasonable access, during normal business hours to the properties, books, contracts and records as well as to the management personnel of KWG and the KWG Subsidiaries, and, during such period, KWG shall, and shall cause the KWG Subsidiaries to, furnish promptly to Spider all information concerning the business, properties and personnel of KWG and the KWG Subsidiaries as Spider may reasonably request.
	(l)	Closing Documents. KWG shall execute and deliver, or cause to be executed and delivered, at the closing of the transactions contemplated by the Combination Agreement such customary agreements, certificates, opinions, resolutions and other closing documents as may be required by Spider, all in form satisfactory to Spider, acting reasonably.

	(m)	Usual Business. Other than in contemplation of or as required to give effect to the transactions contemplated by the Combination Agreement including the Spinoff, from the date of the Combination Agreement until the earlier of the date of the Completion Deadline and the Effective Date, KWG shall and shall cause the KWG Subsidiaries to conduct its business only, and shall not take any action except in the ordinary and regular course of business consistent with its past practices.
	(n)	Keep Fully Informed. Subject to applicable Laws, KWG shall use commercially reasonable efforts to conduct itself so as to keep Spider fully informed as to the material decisions or actions required or required to be made with respect to the operation of its business.
	(o)	KWG Sub. In its capacity as the sole shareholder of KWG Sub, KWG shall:
		(i) take all such action as is necessary or desirable to cause KWG Sub to satisfy its obligations under the Combination Agreement, including without limitation, passing a resolution, on or prior to the Effective Date in form and substance satisfactory to each of KWG and Spider, acting reasonably, duly approving the Amalgamation; and
		(ii) prior to the Effective Date, not cause or permit KWG Sub to issue any securities or enter into any agreements to issue or grant options, warrants or rights to purchase any of its securities except for the issuance of a nominal number of KWG Sub Shares to KWG, or carry on any business, enter into any transaction or effect any corporate act whatsoever, other than as contemplated in the Combination Agreement or as reasonably necessary to carry out the Amalgamation, unless previously consented to in writing by Spider; and
		(iii) after the Effective Date, cause Amalco to satisfy any obligations which Amalco may have to a Spider Shareholder who exercises Dissent Rights.
	(p)	Shares. KWG will issue, at the Effective Time, KWG Shares, in accordance with the terms of the Combination Agreement, to those Spider Shareholders who are entitled to receive KWG Shares pursuant to the Amalgamation.

	(a)	make, solicit, initiate, facilitate, entertain, encourage, engage in, respond to or promote (including by way of furnishing information, permitting any visit to facilities or properties of KWG or any KWG Subsidiary or entering into any form of agreement, arrangement or understanding) any inquiries, submissions, proposals or offers regarding, constituting or that may reasonably be expected to lead to a KWG Alternative Proposal or potential KWG Alternative Proposal;
	(b)	encourage or participate, directly or indirectly, in any discussions or negotiations regarding, or furnish to any Person any information or otherwise co-operate with, respond to, assist or participate in, any KWG Alternative Proposal or potential KWG Alternative Proposal;
	(c)	612. agree to, accept, approve or recommend, or propose publicly to agree to, accept, approve or recommend any KWG Alternative Proposal or potential KWG Alternative Proposal (it being understood that publicly taking no position or a neutral position with respect to a KWG Alternative Proposal until fifteen (15) days following formal commencement of such KWG Alternative Proposal shall not be considered a breach) of KWG’s non-solicitation covenants; or

	(a)	KWG has complied with its obligations with respect to non-solicitation and such other provisions, as applicable, set forth in the Combination Agreement;
	(b)	such KWG Superior Proposal does not provide for the payment of any break, termination or other fees or expenses to the other party in the event that KWG completes the Amalgamation or any similar other transaction with Spider or any of its affiliates agreed prior to any termination of the Combination Agreement;
	(c)	it has provided Spider with the information about such KWG Alternative Proposal, as required, that the KWG Board has determined would be a KWG Superior Proposal; and
	(d)	five (5) Business Days shall have elapsed from the later of the date Spider received notice of the determination of the KWG Board to accept, approve, recommend or enter into an agreement in respect of such KWG Superior Proposal and the date Spider received written notice thereof and any additional documentation relating thereto.

	(a)	by mutual written agreement between Spider and KWG;
	(b)	subject to the notice and cure provisions of the Combination Agreement:
		(i) by Spider, if any condition for the benefit of Spider is not performed or satisfied at or before the Effective Date or otherwise waived by Spider in accordance with the Combination Agreement;
		(ii) by KWG, if any condition for the benefit of KWG is not satisfied at or before the Effective Date or otherwise waived by KWG in accordance with the Combination Agreement;
		(iii) if any of the mutual conditions for the benefit of Spider and KWG, as the case may be, is not satisfied at or before the Effective Date or otherwise waived by the terminating party in accordance with the Combination Agreement;
	(c)	by KWG:
		(i) if the Spider Board fails to recommend to Spider Shareholders that they vote in favour of the Amalgamation and the Special Resolution and the other transactions contemplated in the Combination Agreement, except as expressly permitted in the Combination Agreement with respect to a Spider Alternative Proposal;
		(ii) if the Spider Board shall have made a Change of Spider Recommendation;
		(iii) if the Spider Board accepts, approves or recommends a Spider Alternative Proposal;
		(iv) if Spider enters into a letter of intent or definitive written agreement with respect to a Spider Superior Proposal;
		(v) except as otherwise provided for in the Combination Agreement with respect to a Spider Alternative Proposal, if Spider shall have failed, after being requested by KWG in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated in the Combination Agreement as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from KWG; or
		(vi) if any Spider Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid);
	(d)	by KWG if Spider shall not have mailed this Information Circular to the Spider Shareholders on or before June 21, 2010; provided that KWG shall have materially fulfilled its obligations under the Combination Agreement to provide Spider with all information as may reasonably be requested by Spider or as required by applicable Laws with respect to KWG and its businesses for inclusion in this Information Circular;
	(e)	by KWG if Spider shall have failed to hold the Meeting on or before July 14, 2010, unless such failure results from an adjournment of the Meeting for not more than ten (10) Business Days due to its obligation under the Combination Agreement to adjourn the Meeting in connection with a Spider Alternative Proposal;
	(f)	by KWG if there is an intentional breach of the covenants by Spider or any of its directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;
	(g)	by Spider:
		(i) if the KWG Board shall have made a Change of KWG Recommendation;
		(ii) if the KWG Board accepts, approves or recommends a KWG Alternative Proposal;

		(iii) if KWG enters into a letter of intent or definitive written agreement with respect to a KWG Alternative Proposal;
		(iv) except as otherwise provided for in the Combination Agreement with respect to a KWG Alternative Proposal, if KWG shall have failed, after being requested by Spider in writing, to reaffirm its approval or recommendation of the Amalgamation and the transactions contemplated in the Combination Agreement as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from Spider; or
		(v) if any KWG Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid);
	(h)	by Spider if there is an intentional breach of the covenants set forth in the Combination Agreement by KWG, any of its Subsidiaries or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, on or before the Effective Date;
	(i)	by KWG or by Spider if the Amalgamation shall not have been completed by the Completion Deadline; provided however, (i) there is no intentional breach of the covenants set forth in the Combination Agreement of such terminating Party, any of its Subsidiaries, if any, or any of their respective directors, officers, employees, agents, consultants or other representatives, in each case, before the Completion Deadline, and (ii) if the Amalgamation has not been completed by the Completion Deadline because the Meeting has not been held due to the fault of Spider (the Parties acknowledging that Spider is not at fault in the event that the Meeting has not been held due to an order of a Governmental Entity), then Spider shall not be entitled to terminate the Combination Agreement;
	(j)	by KWG in order to enter into a letter of intent or definitive agreement with respect to a KWG Superior Proposal or otherwise accept, approve or recommend a KWG Superior Proposal, subject to compliance by KWG with the non-solicitation and notice requirements set forth in the Combination Agreement;
	(k)	by Spider in order to enter into a letter of intent or definitive agreement with respect to a Spider Superior Proposal or otherwise accept, approve or recommend a Spider Superior Proposal, subject to compliance by Spider with the non-solicitation and notice requirements set forth in the Combination Agreement;
	(l)	by KWG, if Spider shall have breached or not performed any material covenant when required to be performed by it under the Combination Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by Spider within the lesser of ten (10) days from the date of delivery of written notice of termination from KWG and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of Spider shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on Spider or have a material adverse effect on the ability of KWG to complete the Amalgamation; or
	(m)	by Spider, if KWG shall have breached or not performed any material covenant when required to be performed by it under the Combination Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by KWG within the lesser of ten (10) days from the date of delivery of written notice of termination from Spider and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of KWG shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on KWG or have a material adverse effect on the ability of Spider to complete the Amalgamation.

	(a)	by KWG in order to permit KWG to enter into a letter of intent or definitive agreement with respect to a KWG Superior Proposal or otherwise accept, approve or recommend a KWG Superior Proposal;
	(b)	by Spider (i) if the KWG Board shall have made a Change of KWG Recommendation; (ii) if the KWG Board accepts, approves or recommends a KWG Alternative Proposal; (iii) if KWG enters into a letter of intent or definitive written agreement with respect to a KWG Alternative Proposal; (iv) except as otherwise provided for in the Combination Agreement with respect to a KWG Alternative Proposal, if KWG shall have failed, after being requested by Spider in writing, to reaffirm its approval or recommendation of the Amalgamation as promptly as possible (but in any event within five (5) Business Days) after receipt of such written request from Spider; or (vi) if any KWG Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid); or
	(c)	by Spider, if KWG shall have breached or not performed any material covenant when required to be performed by it under the Combination Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by KWG within the lesser of ten (10) days from the date of delivery of written notice of termination from Spider and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of KWG shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on KWG or have a material adverse effect on the ability of Spider to complete the Amalgamation, provided that there is no breach or non-performance by Spider, in any material respect, of any of its representations, warranties or covenants made in the Combination Agreement which has not been cured by Spider pursuant to the cure provisions of the Combination Agreement,

	(X) in the case of a termination referred to in (a) above, as a condition to the right of KWG to terminate the Combination Agreement, KWG shall, on or prior to the Termination Date, pay to Spider a cash payment equal to $2,300,000, or
	(Y) in the case of a termination referred to in (b) above, within two (2) Business Days following the Termination Date, KWG shall pay to Spider a cash payment equal to $2,300,000, or
	(Z) in the case of a termination referred to in (c) above, within two (2) Business Days following the Termination Date, KWG shall pay to Spider a cash payment equal to $1,400,000,

		Days) after receipt of such written request from KWG; or; (vi) if any Spider Shares are acquired by a third party pursuant to a take-over bid (including an exempt take-over bid);
	(b)	by Spider in order to enter into a letter of intent or definitive agreement with respect to a Spider Superior Proposal or otherwise accept, approve or recommend a Spider Superior Proposal, subject to compliance with the non-solicitation and notice provisions of the Combination Agreement; or
	(c)	by KWG if Spider shall have failed to mail this Information Circular to the Spider Shareholders on or before June 21, 2010 (provided that KWG shall have materially fulfilled its obligations with respect to the information to be provided by KWG to Spider for inclusion in this Information Circular, as set out above) or hold the Meeting on or before July 14, 2010 (unless such failure results from an adjournment of the Meeting for not more than ten (10) Business Days due to its obligation under the Combination Agreement to adjourn the Meeting in connection with a Spider Alternative Proposal); or
	(d)	by KWG, if Spider shall have breached or not performed any material covenant when required to be performed by it under the Combination Agreement (unless such non-performance or breach, if susceptible to being cured, is cured by Spider within the lesser of ten (10) days from the date of delivery of written notice of termination from KWG and the number of days remaining before the earlier of the Effective Date and the Completion Deadline) or if any representation or warranty of Spider shall have been untrue when made to the extent that the failure of such representation or warranty to be true and correct shall result in a Material Adverse Effect on Spider or have a material adverse effect on the ability of KWG to complete the Amalgamation, provided that there is no breach or non-performance by KWG, in any material respect, of any of its representations, warranties or covenants made in the Combination Agreement which has not been cured by the cure provisions of the Combination Agreement,

Project Area	Property	Claims/Hectares	JV details (potential interest)	Commodity sought
Spider #1	Kyle Kimberlite Project	Kyle Project - 8/2,048	Renforth to earn in 55% from Spider/KWG (Renforth operator) Spider to reduce to 30% KWG to reduce to 15%	Diamonds
Spider #1	Kyle Kimberlite Project	Renforth Claims - 15/3,616	Renforth option to reduce to 55% Spider to earn up to 30% KWG to earn up to 15%	Diamonds, base metals
Spider #1	MacFadyen Project	5/672	KWG-Spider Joint Venture KWG (operator) to earn up to 66 2/3% Spider to reduce to 33 1/3%	Diamonds
Spider #3	McFaulds Lake VMS Project	McFaulds Project (W) - 51/11,200	UC to earn in from Spider/KWG (UC operator) KWG/Spider to reduce to 45%	Copper, zinc
Spider #3	McFaulds Lake VMS Project	McFaulds Project (E) - 73/17,088	UC to earn in on project KWG/Spider to reduce to 45%	Copper, zinc

Phase	Description of Activity/Program	Estimated. Cost($)
1 a	Geometallurgical studies involving mineralogical and microprobe work	50,000
1 b	Metallurgical testing including allowance for drill holes to get metallurgical sample	500,000
1 c	Infrastructural study	50,000
1 d	Prefeasibility/scoping study	100,000
	Contingency on phase 1 activities (about 10% of totals 1 a to 1 d)	70,000
	Sub total Phase 1	770,000

2	Diamond drilling	4,000,000
	Contingency on phase 2 activities	400,000
	Sub-total phase 2	4,400,000

1 & 2	Grand total	5,170,000

	§	Included in the 2009 expenses is $470,000 paid to directors and officers upon the change of control constituted in the acquisition by Cliffs Greene B.V. of 19.9% of KWG’s then outstanding shares. Included also is $500,000 paid as special bonuses to certain directors and officers of KWG as a result of exemplary accomplishments made during the year;
	§	KWG’s subsidiary Debuts which became a reporting issuer in Ontario in late 2008, incurred administrative and corporate expenses amounting to $211,000 during the year compared to $336,000 in 2008;
	§	Increased salaries of $132,000, consulting fees of $192,000 and professional fees of $178,000 were incurred due to greater involvement of certain officers and outside consultants in relation to the reorganization and operation of KWG, joint-venture set-up and the private placements;
	§	Promotional and investor relations expenses increased by $167,000 as KWG focused on increasing its public awareness to enhance shareholder value; and
	§	Corporate expenses increased by $164,000 which included an increase in filing fees of $42,000 due to the number of private placement issuances and warrant redemptions during the year, increased overheads in the Toronto office of $92,000 and increased travel costs of $21,000.

	Fiscal years ended December 31
	2009 $	2008 $	2007 $
Working capital	472	1,295	5,452
Total assets	20,730	11,502	22,514
Total income	20	211	28
Loss	(3,995)	(11,132)	(892)
Loss per share	(0.01)	(0.04)	(0.01)

Quarter	Total income ($)	Loss ($)	Loss per share (basic and diluted) ($)
December 31, 2009	2	(689)	<(0.01)
September 30, 2009	1	(949)	<(0.01)
June 30, 2009	14	(1,883)	<(0.01)
March 31, 2009	3	(474)	<(0.00)
December 31, 2008	87	(4,695)	<(0.02)
September 30, 2008	54	(333)	<(0.00)
June 30, 2008	25	(5,673)	<(0.02)
March 31, 2008	45	(431)	<(0.00)