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KWG Resources reaches out to First Nations

March 1, 2012
by Norm Tollinsky
In: News with 0 Comments
A junior mining company with a development project in Northern Ontario’s Ring of Fire has found a novel way of mixing philanthropy and self-interest.KWG Resources, which owns 30 per cent of the Big Daddy chromite deposit in the Ring of Fire, is working with the United Way of Thunder Bay and the Wasaya Group Inc., a First Nation-owned airline serving the region, to fund a residence for First Nation students attending the city’s Dennis Franklin Cromarty High School.First Nation youth from remote fly-in communities in Ontario’s Far North currently have to board with families in Thunder Bay. Dropout rates for First Nation students are high and several suicides have been attributed to the challenge of adjusting to life far from home. Living in an environment with a culturally compatible support network, it’s hoped, would go a long way toward easing the transition.

First Nation youth pitched the idea to Wasaya Group president and CEO Tom Kamenawatamin. He, in turn, raised the issue with KWG president and CEO Frank Smeenk, who proposed funding the residence through the donation of flow-through shares.

In December, KWG issued 17,500,000 shares on a flow-through basis for proceeds of $1,750,000 to fund a drilling program at the Big Daddy deposit with its 70 per cent partner, Cliffs Natural Resources.  Smeenk and KWG vice-president of exploration Moe Lavigne got the ball rolling by purchasing just under $250,000 worth of the shares and donating them to the United Way.

Their taxable income is reduced by the amount of the purchase and is reduced again when the shares are donated. Everyone benefits. The tax savings cover most of the initial purchase price of the shares, dramatically reducing the cost of the donation. At the same time, the proposed student residence in Thunder Bay moves one step closer to reality.

The only remaining piece of the puzzle is to find a buyer for the donated shares, but “that’s part of a larger plan that I can’t talk about,” said Smeenk, who would only say that KWG “is always looking for friendly shareholders.”

Routing the funds through the United Way helps the Thunder Bay agency achieve its fundraising goals, and gets people in the city “focused on what I would call a cancer in their midst that’s easily cured,” said the KWG president.

Most important, “it’s something that will resonate with all of the remote communities that send their children to Thunder Bay to go to high school.”

Winning the support of the First Nations is part of a much bigger strategic objective for KWG Resources, which could be left out in the cold if Cliffs Natural Resources receives approval to develop its neighbouring 100 per cent-owned Black Thor chromite deposit.

“Cliffs has their view of what they would like to do and it doesn’t include us, so I’m going to use every possible lever I can to ensure that the shareholders of KWG are in the chrome business in this century and not the next one,” said Smeenk.

“We own 30 per cent of Big Daddy and Cliffs owns 70 per cent, but they filed plans with the government to develop Black Thor even though Big Daddy is the richer deposit.”

Cliffs’ existing plan still has several hurdles to get through though, including an environmental assessment and a deal with the First Nations, “so it’s not over,” said the KWG president.

“If we can build a $2 billion railroad (to the mine site) using incentives that are built into our taxes and have it owned by the First Nations, is that more attractive to the taxpayers of Canada and Ontario, or is it more attractive to have Cliffs get contributions of hundreds of millions of dollars from the Ontario government for the building of an all-weather road?”

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