As you say, Lar, clear as mud. Unless there has been work done by the other partner, both keep their 50/50 share. So, if no work has been done before UC's earning, the remaining 45% would be splitted 22,5% each, and they would be 50/50 after each partner exercizing their full preemption right on 27,5% of this project. But from the Annual Report you cite, it seems that the participation of KWG has been reduced to 43%, so it's no longer 50%, and exercice of the preemption right would let KWG as a minority partner in any ways. Someone in Stockhouse forum said it has been confirmed by phone from KWG that KWG had only 15% left on the Project, that is 1/3 of the 45 % that remains. In these circumstances, I see no advantage to KWG to increase its share. Majority with operatorship was no good for UC, minority without operatorship is certainly no better for KWG!

To bring some more light, if it may, here is an excerpt from the most recent FS:

"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.

Each party’s interest is diluted by not contributing further to the other party’s exploration program until its interest has reached 33 1/3%. 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."

...

"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 $4,500,000 prior to March 6, 2011. This requirement has been met. 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."

GLTA.

BaBe.