KWG's new 19.9% owner calls buy a strategic investment

2009-03-16 18:30 ET - News Release

Mr. Steve Baisden of Cliffs Natural Resources reports

CLIFFS NATURAL RESOURCES SUBSIDIARY, CLIFFS GREENE B.V., ANNOUNCES STRATEGIC INVESTMENT IN KWG RESOURCES INC.

Cliffs Natural Resources Inc.'s subsidiary, Cliffs Greene BV, has acquired, by way of private placement, securities issued from treasury by KWG Resources Inc.

The securities include:

1. 50,448,987 units of KWG Resources, each unit comprising one common share of KWG Resources and approximately 0.44 of a common share purchase warrant of KWG Resources, such that on a total basis Cliffs Greene acquired 50,448,987 common shares of KWG Resources and 22,224,784 warrants of KWG Resources;
2. A non-interest-bearing convertible debenture of KWG Resources in the principal amount of $1,033,398 (U.S.) maturing on April 16, 2009.

One warrant becomes exercisable for every five common shares issued pursuant to outstanding warrants, options or other rights to purchase common shares as at Jan. 20, 2009, and entitles Cliffs Greene to acquire one common share at a price of five U.S. cents, such price to remain in effect until March 16, 2010, and thereafter at a price of 10 U.S. cents (subject to the undertaking of KWG Resources to reduce such price to five U.S. cents upon regulatory approval), with all warrants expiring by March 16, 2014, at the latest. Subject to obtaining approval of the shareholders of KWG Resources, the debenture will automatically convert into units resulting in a further issuance to Cliffs Greene of 21,135,069 common shares and 9,310,839 warrants, and in the event that such conditions have not been met before April 16, 2009, the debenture is required to be repaid.

The purchase of the units and the debenture result from the exercise by Cliffs Greene as assignee of an option to purchase securities entered into by Cliffs Natural Resources (the assignor and indirect parent of Cliffs Greene) and KWG Resources dated Jan. 20, 2009. The entering into of the option was announced by KWG Resources on Jan. 21, 2009.

The 50,448,987 common shares acquired by Cliffs Greene represent 14.9 per cent of the total outstanding KWG Resources common shares. Upon the conversion of the debenture, the additional 21,135,069 common shares into which the debenture is convertible represent 5.8 per cent of the total KWG Resources common shares then outstanding, such that, together with the 50,448,987 common shares already held, Cliffs Greene's total percentage holding of common shares would be 19.9 per cent for a total of 71,584,056 common shares. The acquisition of common shares pursuant to the exercise of the warrants (whether the warrants comprised in the units or the warrants underlying the debenture) will not increase Cliffs Greene's percentage holding of common shares in KWG Resources beyond 19.9 per cent, such warrants having been issued for anti-dilutive purposes. KWG Resources has disclosed that the number of outstanding common shares following the private placement is 338,583,808 and the number of outstanding warrants is 149,159,629.

Except for the units and the debenture acquired today, Cliffs Greene does not own or control any securities of KWG Resources. Accordingly, after completion of the private placement, Cliffs Greene owns and controls:

1. 50,448,987 common shares representing 14.9 per cent of the total outstanding KWG Resources common shares;
2. 22,224,784 warrants representing 14.9 per cent of the total outstanding warrants;
3. The debenture in the principal amount of $1,033,398 (U.S.), which upon conversion will result in Cliffs Greene owning and controlling an additional 21,135,069 common shares, representing 5.8 per cent of the total KWG Resources common shares then outstanding and together with the 50,448,987 common shares already held, representing 19.9 per cent of the total outstanding KWG Resources common shares for a total of 71,584,056 common shares, as well as an additional 9,310,839 warrants, representing 5.8 per cent of the then total outstanding warrants and together with the 22,224,784 warrants already held, representing 19.9 per cent of the total outstanding warrants for a total of 31,535,623 warrants.

Cliffs Greene acquired the units at a price of 4.8893 (U.S.) cents (6.3096 cents) per unit and acquired the debenture for the principal amount of $1,033,398 (U.S.) ($1,333,600) (the debenture being convertible into units at the rate of 4.8893 U.S. cents (6.3096 cents) per unit), for a total amount of $3.5-million (U.S.) ($4,516,750).

Cliffs Greene acquired the securities of KWG Resources as a strategic investment. Upon the conversion of the debenture, Cliffs Greene will be considered to be a control person under the policies of the TSX Venture Exchange. Concurrent to the closing of the private placement, Cliffs Greene and KWG Resources entered into a shareholder agreement conferring rights of first refusal and pre-emptive rights in favour of Cliffs Greene in connection with the issuance of voting shares or convertible securities by KWG Resources (subject to certain excluded issuances as provided therein) and the right to designate a representative to the board of directors of KWG Resources. Subject to restrictions under applicable law, Cliffs Greene may in the future acquire or dispose of additional securities of KWG Resources depending on factors such as the business and prospects of KWG Resources and future market conditions.