KWG RESOURCES INC.

Ground Gravity and Magnetometer Surveys On McFaulds Lake Chromite Property

BMA 527861 Area, Porcupine Mining Division Lowlands of northern 43D/16 Greig Lake

Work Report

Project 306.01

September 20, 2011 Simon Tshimbalanga, Eng. CONTENTS 1. INTRODUCTION ...... 2 2. PROPERTY LOCALIZATION AND ACCESS ...... 2 3. CLAIMS ...... 3 4. REGIONAL GEOLOGY...... 3 5. LOCAL GEOLOGY ...... 3 6. PREVIOUS WORK ...... 4 7. PERSONNEL AND INSTRUMENTATION ...... 5 8. MAGNETOMETRIC SURVEY ...... 6 8.1 Purpose of the Magnetometric survey and methodology ...... 6 8.2 Presentation of the results ...... 6 8.3 Results of the Magnetometric survey ...... 6 9. GRAVITY SURVEY AND PROCEDURES ...... 6 9.1. Reduction of the Gravity Data ...... 7 9.2. Determination of the Bouguer Gb ...... 8 9.3. Results ...... 9 9.4. Description of the Gravity Anomalies ...... 9 10. CONCLUSION ...... 9 GEOPHYSICAL MAP

CERTIFICATE OF QUALIFICATION

APPENDIX A CLAIM ABSTRACS AND CLAIM MAP

APPENDIX B EQUIPMENT SPECIFICATIONS 2

1. INTRODUCTION

At the request of Mr. M.J. Lavigne, M.Sc. Geo., Vice President Exploration & Development for KWG Resources Inc., Magnetic and Gravimetric surveys were carried out on the McFaulds Lake Chromite Property from April 16th to 22nd, 2011. The geophysical surveys were carried out by GÉOSIG INC., a consulting firm in geophysics. This property is located in the James Bay lowlands just west of McFaulds Lake in . In the area, previous exploration programs led to the detection of several interesting VSM sulphides and the presence of massive chromitite layers proved the potential of the area. Previous drilling in the property led to the discovery of such a massive layer of Chromitite. The purpose of the present surveys was to identify the geophysical signature as well as the extension of a new potential chromitite layer as well as possible massive sulphide zones aiming aeromagnetic targets. This report presents the results of the geophysical survey only.

2. PROPERTY LOCALIZATION AND ACCESS The McFaulds Lake Chromite Property is in the North part of Ontario, within the James Bay lowlands. It is located few kilometres west of McFaulds Lake. Among companies, the area is often called the Ring of Fire, which is located about 530 km northeast of Thunder Bay. Accessibility is usually made by flying to Webequie and then flying by helicopter 92 km east of Webequie. When lakes are open or completely frozen, access can be made by flying directly to the camps.

McFAULDS LAKE CRHOMITE PROPERTY

McFaulds Lake

-Source: Ontario Ministry of Transportation, Marten Falls, Moosonee Location map of the McFaulds Lake Property

Due to the beginning of brake up, the surveys covered only one line, L0+00 from station 11+75N to station 4+00S. 3

3. CLAIMS

The McFaulds Lake Chromite Property is composed of 16 contiguous, unpatented mining claim blocks located within the Porcupine Mining Division (Appendix A). The claim abstracts and the portion of the sheet G-4306 are given in Appendix A.

The geophysical surveys covered the 2 claim blocks listed below:

Township/Area BMA 527861, G-4306 map 3010636 3010637

4. REGIONAL GEOLOGY

The relatively flat-lying Hudson Bay and James Bay lowlands form a broad, dominantly carbonate, Paleozoic to Mesozoic cover over a significant portion of the precambrian rocks in Northern Ontario. Most of the interpretation is based mainly on aeromagnetic data and limited -drill hole information. The most striking and significant feature is the aeromagnetic expression of Uchi domain greenstone belts, along the southern flank of the Sachigo superterrane, trending northeast under the James Bay Lowland and wrapping around the eastern end of the Island lake domain, a portion of the Sachigo superterrane. This greenstone trend merges with the Oxford-Stull domain near the western margin of the James Bay Lowland just east of the McFaulds Lake massive sulphide deposits, currently under exploration by Freewest Resources Inc., Noront Resources Inc., Spider Resources Inc. and other companies. This combined array of Neoarchean greenstone belts continues east, narrowing under the James Bay Lowland, toward the Eastmain greenstone-granite domain in Quebec.

5. LOCAL GEOLOGY

Most of the exploration is concentrated in the "Ring of Fire Intrusion" or RFI, a highly magnetic ultramafic intrusion emplaced for tens of kilometres along the margin of a regional scale granodiorite pluton. It appears that a series of conduits cutting across the granodiorite have acted as feeders to the main RFI. Massive sulphides, Ni-Cu-PGE Deposits and Chromite occurrences are found in conduits of feeder dykes to the main RFI and in the RFI.

Chromite appears in semi-massive to massive accumulations in the ultramafic igneous rock. Stratiform chromite deposits are sheet-like accumulations of chromite that occur in layered ultramafic to mafic igneous intrusions.

Diamond drilling by the KWG/Spider JV, has identified a northeast trending zone of continuous chrome mineralization. The mineralized zone dips towards the NW at about 70 degrees and consists of varying widths of a variable tenor of chrome mineralization, forming a series of stacked lenses. The Freewest Blackthorn chromite zone is situated on the 4

southeast margin of a through-going magnetic high of at least 4 kilometres showing the location of the main ultramafic sill.

6. PREVIOUS WORK

1906-1940-1965 The Geological Survey of and the Ontario Department of Mines carried out regional studies focused on petroleum possibilities.

1959 - Consolidated African Selection Trust started diamond exploration in the Lowlands.

1962 - De Beers South Africa started to work in the area.

1988 - Monopros Ltd., De Beers’ Canadian subsidiary, discovered the Attawapiskat kimberlite cluster.

In 1990’s - Spider Resources Inc., (“Spider”) and KWG Resources Inc., (“KWG”) commenced an ambitious, airborne magnetic-based, diamond exploration program in the northern James Bay Lowlands as joint venture partners, discovering the Good Friday and MacFayden kimberlites in the Attawapiskat cluster and an additional five kimberlites to the east. The Author of this report participated in a ground magnetic survey and Pulse EM survey in that time.

2002 - De Beers Canada Inc. in joint venture with Spider and KWG discovered the McFaulds No. 1 volcanogenic massive sulphide body while drilling for kimberlites. In November, Spider recorded the first group of claims and subsequent work discovered the other McFaulds occurrences. Staking by other junior mining companies started and kept going during the first half of 2003.

2003 - The Double Eagle Claims were staked by Noront, following the VMS discovery.

2005 - KWG and its Joint Venture partner Spider Resources Inc. (TSXV-SPQ) have negotiated terms of an option agreement with Freewest Resources Canada Inc. (TSXV-FWR) for each of them to individually earn a 25% interest in Freewest’s mineral claims that are adjacent to the area of the McFaulds Lake discovery. That option agreement is now being finalized and programs dictated by its terms are also being prepared. Funding of these will be a necessary priority of the Joint Venture. And an airborne Magnetic and VLF survey was flown over the claims.

2006 - KWG RESOURCES INC. (TSXV-KWG), Spider Resources Inc. (TSXV-SPQ) and Freewest Resources Canada Inc. (TSXV-FWR) completed a drilling program on the Freewest option property, located approximately 15 kilometres SW of the McFauld’s Lake volcanogenic massive sulphide (“VMS”) project in the Greater James Bay region of Northern Ontario. Highlights of the exploration program included the discovery of a chrome-- bearing peridotite, where two layers of massive chromitite were encountered. The upper layer of massive chromitite assayed 22.7% Chrome, 0.166 g/t 5

Platinum, 0.24 g/t Palladium over 1.05 meters, while the lower layer assayed 23.7% Chrome, 0.21 g/t Platinum and 0.462 g/t Palladium, over 0.6 meters.

2007 - In early September. Noront announced the discovery of significant Ni-Cu-PGE mineralization. The deposit was named Eagle One. A staking campaign was launched and attracted attention of a number of competing groups and junior companies. At one point, there were a minimum of 10 helicopters in the immediate area, staking anything possessing a high magnetic signature, in a pattern that covered the geophysically interpreted greenstone belt in contact with the centrally located granodiorite. Staking continued from early September 2007 until into 2008, covering most of the area interpreted as being the “Ring of Fire”, and west toward De Beers Canada’s Victor Diamond Mine. The mining recorder for the area confirmed to Noront that this was the largest staking rush in the Province of Ontario since the Hemlo discovery. KWG Resources Inc (TSXV: KWG) applauds the mineral discovery announced by Noront Resources Ltd (TSXV: NOT).

2008 - The current ownership on the subject claims is now 25% KWG, 25% Spider and 50% Freewest. Since June, the main exploration focus of the KWG-Spider Joint Venture has been on the massive Chromite occurrence that was first discovered on the Freewest Option property in March of 2006. 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 Resources Ltd's ("Noront") Eagle One Magmatic Massive Sulphide (Nickel Copper and PGM), or five 5 kilometres northeast of Noront’s Blackbird One and Two (Chromite) discoveries, and 4 kilometres southwest of Freewest’s Black Thor Chromite discovery.

7. PERSONNEL AND INSTRUMENTATION

The magnetometric, positional and levelling surveys was carried out by Eric Gaudet, technician and the gravity survey was carried out by Danny Pageau, technician. Simon Tshimbalanga, Engineer, did the final data processing and he also wrote the report. The following instruments were used for the Magnetometer survey: - GSM-19WV field unit, GEM System Inc., Richmond Hill, Ont., s/n 612627 - GSM-19WV Base Station, GEM System Inc., Richmond Hill, Ont., s/n 66573

The following instruments were used for the gravity survey: Gravimeter • Gravimeter Lacoste & Romberg Model D s/n 53 RTDGPS • GPS R8 GNSS Rover Receiver with RTK/Internal Radio s/n 5014423245 • GPS R8 GNSS Rover Base with RTK/Internal Radio s/n 5010419324 • Radio HPB450 35W Trimble HPB Radio Base radio s/n 8339052 • TSC2 2.4 GHZ Survey Controller s/n SS33C03135 6

8. MAGNETOMETRIC SURVEY

8.1 Purpose of the Magnetometric survey and methodology

Magnetic surveys are useful in exploration as magnetic anomalies mostly represent changes in the physical properties of subsurface rocks. The property of a rock determines its magnetic effects and the intensity of its magnetization. During a survey, we measure the total magnetic field and the resulting total field map allows the definition of near-surface magnetic bodies and the vertical gradient helps to trace their contacts.

The measurements for the magnetic total field were taken each 12.5 meters.

GSM-19WV magnetometers were used on the field as well as base station with a 30 seconds registering readings period. The magnetic readings have been automatically corrected for diurnal variations when the data was dumped with a base value of 57 700 nanoTesla (nT). The magnetometer system measures the value of the total magnetic field with a precision of 0.1 nanoTesla (nT).

8.2 Presentation of the results Geophysical data were processed and presented on maps using the computer software programs; Geosoft and MicroStation.

The magnetic results are presented on a profile map on which the magnetic total field profiles appear as plain red line at a vertical scale of 4000 nT per centimetre, with a base value of 57 200 nT.

8.3 Results of the Magnetometric survey The property magnetic background is around 58 500 nT with a maximum of 62 284 nT and a minimum of 57 550 nT.

The Magnetometric colour contour map shows a magnetic gradient increasing toward the south with two main magnetic horizons crossing the line at 1+87.5N and 1+75S. The two magnetic horizons reaches respectfully intensity of 3780 nT and 3100 nT. They may reflect ultramafic intrusion like gabbro or peridotite or pyroxenite. The magnetic horizon at 1+87.5N suggests a dip toward north whereas the one at 1+75S suggests a dip to the south. Therefore, they may reflect an anticline structure.

9. GRAVITY SURVEY AND PROCEDURES

Gravity stations were read at 25m separation. The grid was put mainly to overlay magnetic high and low anomalies and in an area where possible gravimetric anomalies could occur and be caused by sulphides or chromite. As mentioned earlier, the survey started in April 16th to 22nd, 2011. 7

The altitude and coordinates of the base stations was obtained by the NRCan’s PPP (Precise Point Positioning), the free online post-processing service that allows GPS users in Canada to compute better-accuracy positions from their GPS raw observation data. The procedure was to collect at least two successive 6-hours of static raw GPS data at 30-second data rate. For the McFaulds Lake chromite property, one GPS base station was established on the site with the PPP system since the topography of the property is flat. Following are the coordinates of the GPS base station: PPP-McFaulds Lake property GPS Base Station: UTM NAD83-SCRS, 16 North, 43D/16, vertical datum geoid model HT2_0_Canada North: 5 846 926.806 m East: 561 715.4 m Elevation: 164.057 m Gravity station measurements and XYZ coordinates were collected along uncut lines. All the gravity stations were linked up to a gravity base station established on the grid very close to the 2009 gravity base station. This gravity base station was not linked up to any federal government base stations canvas. It is an arbitrary one. McFaulds Lake property Gravity base station (#28601001): UTM NAD 83 North: 5 849 770.494 m East: 563472.744 m Elevation: 166.383 m Absolute gravity: 981295.43842 milligals The McFaulds Lake property Gravity base station was read at the beginning and at the end of each surveying day. The Lacoste & Romberg Model D gravimeter was used for the survey mentioned above. This gravimeter has a precision of +/- 0.01 mGal in normal use mode.

9.1. Reduction of the Gravity Data

The following corrections were applied to the gravity data: • Free-Air Correction Cfree air =0,3086 Dh Where Dh corresponds to the difference of elevation between the station and the base station. • Bouguer Correction This correction takes into account the density of the material, present or absent, between the station and the base station. A density of 2.67 g/cc was used for this survey. CBouguer = 0,04191 Dh 8

Where Dh is the elevation difference between the station and the base station. • Earth Tides Corrections The software used for the processing of gravity data automatically calculates and applies the Tide corrections. • Latitude Correction The latitude correction was applied starting from the gravity base stations. The latitude correction had to be applied to Bouguer gravity data to compensate for the difference of the Geoid elevation. Latitude correction was applied to the following gravity base stations according to the formula (=978.0327*(1+ 0.0052884 *sin2 -0.0000059* sin22 )). McFaulds Lake Gravity base station absolute gravity = 981295.438 milligals • Terrain Correction The terrain correction was not applied as the area is flat-lying.

9.2. Determination of the Bouguer Gb

Data was processed using the pcgrav software.

Gravimetric determination was calculated according to the following steps:

Gb = (L-L1)K - D(T-T1) + (CM-CM1) + (H-H1) * 0,3086 - (H-h)-(H1-h1) * 0,04191 * d+G Where Gb = Bouguer gravity (milligals)

D = ((L1-L2) * K + CM1 - CM2) / (T2-T1) instrumental drift (milligals/hr); L = Gravity station reading (milligals); L1 = First reading on the gravimeter at the base station; L2 = Second reading on the gravimeter at the base station; K = Gravimetric constant (milligals/unit), D53 (0.997901) T = Time of station reading; T1 = Time of the first reading on the gravimeter at the base station; T2 = Time of the second reading on the gravimeter at the base station; CM = Earth tides correction at the time of the reading (milligals); CM1 = Earth tides correction at the time of the base station's first reading (milligals); CM2 = Earth tides correction at the time of the base station's second reading (milligals); H = Instrument elevation at the considered station (meters); H1 = Instrument elevation at the base station (meters); h = Instrument elevation above the ground at the considered station (meters); hl = Instrument elevation above the ground at the base station (meters); d = Estimated density for sector 2.67 g/cc; G = Gb value for the airport base station; 9

9.3. Results

Results are presented on three (3) maps: one set of map represents the profiles and posting of the Bouguer Anomaly, a second set represents the contours in milligals of the Bouguer Anomaly on a colour background, and the third set of map represents the colour contours of the Residual Bouguer Anomaly processed with the Geosoft software. The Residual Bouguer Anomaly usually enhances gravity anomalies associated with elements of very large deep-seated structural features. It is usually obtained as a difference between the original Bouguer anomaly field and its regional approximation.

9.4. Description of the Gravity Anomalies

The Bouguer anomaly map shows one major gravity anomaly at station 1+00N. Considered on a short rope, it is an approximately 200 metres large anomaly that reaches an intensity of 2 mGals. The gravity anomaly is located between the two magnetic high anomalies described earlier, closer to the one to the north.

The residual Bouguer anomaly has better enhanced the main gravimetric anomaly. The main anomaly has been isolated in the large gravity anomaly seen on the Bouguer anomaly map and smaller anomalies have been emphasized too. It has provided final results that should probably better corresponds to the mineralization. The apex of the main anomaly has been shifted to 1+25N instead of 1+00N and it is located on the south boundary of the north magnetic horizon.

10. CONCLUSION

The gravity survey carried out at McFaulds Lake property was very successful since it led to the detection of gravity anomalies that suggest the presence of buried masses of ore with densities exceeding 2.67 g/cc that suggest the presence of massive sulphides or/and chromitite. Since Freewest drilled chromite in the area, it is strongly believed that the main anomaly should carry chromite too. Extensive gravity and magnetometer surveys should be carried out in order to have a better picture of anomalies in the area before considering a drilling campaign. Geological verifications in the field and drillings are highly recommended.