KWG looking for diamonds in Victor's shadow: the Quebec-based junior plans to spend about $1.5 million looking for kimberlites in the Far North in 2006.

Known diamondiferous kimberlites located near De Beers Canada's Victor diamond mine development have captured the attention of Quebec-based KWG Resources Inc.

Their expected $1.5 million exploration budget for 2006 primarily focuses on the McFadyen kimberlites located eight kilometres north of the De Beers Canada Victor project in Attawapiskat, where through a joint venture with Spider Resources five diamondiferous kimberlites were identified. Two other targets have yet to be tested. Sampling and drilling has begun.

The intent is to define the geology of the pipes to determine its width and depth then use the sample cores to identify the diamond distribution count and therefore the economic grades. Encouraging results will lead to a 200-tonne bulk sample from each pipe.

"We would hope to do that in January (2007)," says Frank C. Smeenk, president and CEO of KWG.

The proximity of diamondiferous kimberlite to a developing mine makes it an attractive asset for KWG, Smeenk says, even if the quality of diamonds pulled from the pipes are of lower grade than those found in the Victor project.

The Attawapiskat De Beers diamonds are the highest quality, purity and clarity he has ever seen.

"They are going to change the grading of diamonds. They are so bright they just jump off the table."

Historically, KWG has been known to be the financial arm for Spider Resources. Under the new joint venture agreement, Smeenk says his company is taking a step back on some of the properties and redirecting its resources in search of other economic targets.

As a result, two new alliances with Freewest Resources Canada Inc. and Diagnos Inc. have been formed.

Diagnos, a developer and marketer of data mining software with exploration properties 150 kilometres west of the Victor project, takes raw geochemistry or geophysics and digests the data to identify potential prospecting targets. The company was given information from properties east of Kyle and McFauld's Lake and came up with six new targets.

Ground exploration work is beginning and by late June and July drilling is expected to begin.

The Sachigo Greenbelt Belt is also proving to be of interest. KWG and Spider can earn a 50-50 joint-venture interest by spending $3 million over four years on the Freewest McFauld's Lake option property, located 15 km from Spider's massive sulphide mineralization.

Strong magnetic and conductor responses possibly related to another massive sulphide zone have been identified. At least three drill holes are planned to test what is known as Anomaly B. Previous drill results on the same anomaly assayed high concentrations of chromite along with platinum group metals (PGM).

Although the grade and quality could not be disclosed, Smeenk says "it is not low, but it needs to be interpreted."

This marks the first time the Sachigo Greenstone Belt was drilled with proven mineralization, he says.

"No one had ever prospected it because it was (overlaid) by limestones and swamps. "There is no outcrop of Archean rock."

After spending 13 years in a joint venture partnership with Spider Resources on six properties, they and KWG have "agreed in principal to go our separate ways."

Spider will carry on with the three properties in the northwest; the volcanic massive sulphide (VMS) McFauld's property, the #1 and #3 Kyle Lake kimberlites, and the Wawa diamond project.

"Spider will finance those projects until they have earned a two-thirds interest and KWG will be reduced to one-third."

KWG will focus on the McFadyen kimberlites where they will earn two-thirds interest and Spider one-third, the Freewest option property and Diagnos discoveries.

Diagnos and KWG Resources are part of a stable of companies owned by Pierre Gauthier, a Montreal businessman larger than life, Smeenk says. Through crises and rebirths Gauthier, a seasoned promoter, was able to raise money in 2002 to earn an interest in Spider Resources properties in the James Bay Lowland.

www.kwg-resources.com

By KELLY LOUISEIZE

Northern Ontario Business