KWG

KWG Resources Inc. (TSX VENTURE:KWG)(FRANKFURT:KW6) 

Today the shareholders of Cliffs Natural Resources Inc ("Cliffs") will elect at
least four directors who are nominated by Casablanca Capital LP. We expect that
this will usher in some change in how Cliffs will in future go about realizing
on the value of its assets. This is therefore an opportune time to provide you
with a status report on your company's initiatives. In the past these
initiatives have often, of necessity, been in response to the actions of Cliffs
and of the government of Ontario. 


Minerals are governed by provincial law in Canada. Like most other jurisdictions
in the world, Ontario makes it a condition of a mineral lease that further
processing of what is mined must be completed in Canada. When it was announced
that Ontario was negotiating terms to finance the construction of a road for
Cliffs to ship chromite ore from the Ring of Fire, we reminded the Ministry of
Northern Development and Mines that the use of KWG's claims for this purpose
would need to comply with this "further processing in Canada" requirement of the
law. The question of whether Cliffs may be granted an easement under the Public
Lands Act over the KWG claims is still before the Courts. No matter how that
question is ultimately decided, it will not alter the law's intent that our
claims may be used to exploit minerals only if their further processing is
completed in Canada. Letter To The Shareholders Of Kwg Resources Inc 


In this regard, we are encouraged by the results of the ongoing testing of the
direct reduction process that we acquired (the "New Production Method") and are
making application to patent. Should we be able to commercialize the New
Production Method it could very substantially reduce the cost of processing
chromite ore into the metalized iron and chrome used in stainless steel making,
by using natural gas rather than electricity. We hope to be able to do pilot
plant testing of the New Production Method in the coming year, in advance of
commercial reactor design and engineering. 


We have previously indicated that slurrying is an option that might be
considered in the early years of mining at the Ring of Fire and the New
Production Method has provided encouragement to further study this option. A
slurry pipeline south and a gas pipeline north - to generate electricity at the
site and for the nearby remote communities - is a development option that we
have had scoped and that we have shared with the government. The pipelines go in
the ground and under the rivers and don't need 98 bridges and culverts. The
railroad that we studied prior to the Cliffs road proposal, may take some time
to achieve social license and economic volumes from market share. 


We also believe that a forestry road from Mishkeegogamang to Marten Falls, and
then north across the Attawapiskat River to the Ring of Fire should be built
first. It could connect Eabematoong, Neskantaga, Marten Falls and Webequie to
the Pickle Lake highway and enable the supply of construction materials and
equipment for the development of the Ring of Fire. It could be used to truck
nickel concentrates out. A scoping study that we had completed suggests that the
cost of such a road could be very reasonable when compared to the alternatives.
This would seem to us to be a highly desirable initial investment to make to set
the stage for development of the Ring of Fire. 


We have also been very active in promoting the concept of using a transportation
authority to finance and build this required infrastructure. We have proposed
that the Ontario Northland Railroad be given a new lease on life by being part
of this transportation infrastructure. It has the backbone of a rail network
that can deliver material to the St. Lawrence River, eastern Canada's year-round
access to world markets. Whether the agency is called a development corporation
or a port authority is not terribly important. The governance structure is
important. 


Our proposed Northland Development Corporation Act creates a hybrid of the two
and suggests what we believe to be a productively constituted Board of
Directors. We believe it to be fundamental that the First Nations and their
neighbouring Northern Ontario municipalities, both large and small, actually
have direction and control of this transportation and development authority. In
the current financial environment of historically low interest rates, there
would appear to be an opportunity for such an agency to issue bonds of perhaps
50 year maturities to raise the money to build the infrastructure. 


We have also completed scoping studies of the possibility of starting mining in
the Ring of Fire from underground rather than by open-pit operations. These
studies determined that one large shaft could provide the means to mine both
Noront's nickel deposit and our Black Horse chromite deposit. 


Sincerely, 

Frank Smeenk, President 

About KWG: KWG has a 30% interest in the Big Daddy chromite deposit and the
right to earn 80% of the Black Horse chromite where resources are being defined.
KWG has also acquired interests in provisional patents including a method for
the direct reduction of chromite to metalized iron and chrome using natural gas.
KWG also owns 100% of Canada Chrome Corporation which has staked claims and
conducted a $15 million surveying and soil testing program for the engineering
and construction of a railroad to the Ring of Fire from Exton, Ontario.


Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this release.


Cautionary Note Regarding Forward-Looking Statements: This Press Release
contains or refers to "forward-looking information" within the meaning of
applicable Canadian securities legislation. Generally, forward-looking
information can be identified by the use of forward-looking terminology such as
"plans", "expects", "is expected", "budget", "estimates", "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", "occur" or "be achieved". All information, other than
information regarding historical fact that addresses activities, events or
developments that KWG believes, expects or anticipates will or may occur in the
future is forward-looking information. Forward-looking information contained in
this Press Release is subject to a number of risks and uncertainties that may
cause the actual results of KWG to differ materially from those discussed in the
forward-looking information, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on, KWG. 


Should one or more of these risks and uncertainties, such as: the actual results
of current exploration programs; risks normally incidental to exploration and
development of mineral properties; the uncertainty of mineral resources
estimates; uncertainties in the interpretation of drill results; the possibility
that future exploration, development or mining results will not be consistent
with expectations; the grade and recovery of ore varying from estimates; the
general risks associated with the mining industry; the Corporation's inability
to maintain its title to its assets; the Corporation's inability to obtain,
maintain, renew and/or extend required licenses, permits, authorizations and/or
approvals from the appropriate regulatory authorities and other risks relating
to the applicable regulatory framework; environmental damages and the cost of
compliance with environmental regulations; environmental risks; adverse land
claims from First Nations groups or other parties; lack of adequate
infrastructure; a lack of support from the Ontario government and federal
government for the development of the Ring of Fire area; the patents to be used
to support the commercialization of the New Production Method will not be
granted; capital and operating costs varying significantly from estimates; the
risk that slurrying is not a viable option for the development of the Ring of
Fire; costs of construction of a proposed road varying significantly from
estimates; the inability to develop and/or complete the construction of a
proposed railroad, permanent amphibious aerodrome together with an adjacent and
permanent all-weather runway and heliport terminal; slowing demand for
ferrochrome products; adverse general market conditions; inflation; changes in
exchange and interest rates; adverse changes in commodity prices; the impact of
consolidation and rationalization in the steel industry; competition; risk that
amendments to current laws, regulations and permits governing operations and
activities of mining companies will have a material adverse impact the
Corporation; the risk that the New Production Method does not prove efficient or
economical; intellectual property litigation; the risk that occur or should
assumptions underlying the forward-looking statements prove incorrect, actual
results may vary materially from those described herein as intended, planned,
anticipated, or expected. We do not intend and do not assume any obligation to
update these forward- looking statements, except as required by law.
Shareholders are cautioned not to put undue reliance on such forward-looking
statements.


Shares issued and outstanding:  777,512,273

FOR FURTHER INFORMATION PLEASE CONTACT: 
Bruce Hodgman
Vice-President
416-642-3575
info@kwgresources.com

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