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Mda may-31-2010

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http://www.spiderresources.com - MDA report

http://www.spiderresources.com - MDA report

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    Mda may-31-2010 Mda may-31-2010 Document Transcript

    • Spider Resources Inc. Management’s Discussion and Analysis Three Months Ended March 31, 2010    
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 INTRODUCTION The following management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of Spider Resources Inc. (“Spider” or “Company”) constitutes management’s review of the factors that affected the Company’s financial and operating performance for the three months ended March 31, 2010. This MD&A has been prepared in compliance with the requirements of National Instrument 51- 102 – Continuous Disclosure Obligations. This discussion should be read in conjunction with the audited annual financial statements of the Company for the year ended December 31, 2009, as well as the unaudited interim financial statements for the three months ended March 31, 2010, together with the notes thereto. Results are reported in Canadian dollars, unless otherwise noted. The unaudited interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) for interim financial reporting and, accordingly, do not include all of the information and notes required by Canadian GAAP for annual financial statements. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results for the interim periods presented are not necessarily indicative of the results that may be expected for any future period. Information contained herein is presented as at May 28, 2010, unless otherwise indicated. For the purposes of preparing this MD&A, management, in conjunction with the board of directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Spider common shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) if it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity. Further information about the Company and its operations is available on Spider’s website at www.spiderresources.com or on SEDAR at www.sedar.com. CAUTION REGARDING FORWARD-LOOKING STATEMENTS This MD&A contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statement. Specifically, this MD&A includes, but is not limited to, forward-looking statements regarding: the potential of Spider’s properties to contain valuable mineral deposits; the Company’s ability to meet its working capital needs at the current level for the next nine-month period ending in the fourth quarter of fiscal 2010; the plans, costs, timing and capital for future exploration and development of Spider’s property interests, including the costs and potential impact of complying with existing and proposed laws and regulations; management’s outlook regarding future trends; sensitivity analysis on financial www.spiderresources.com Page 2
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 instruments, which may vary from amounts disclosed; prices and price volatility for minerals; and general business and economic conditions. Inherent in forward-looking statements are risks, uncertainties and other factors beyond Spider’s ability to predict or control. These risks, uncertainties and other factors include, but are not limited to, mineral price volatility, changes in debt and equity markets, timing and availability of external financing on acceptable terms, the uncertainties involved in interpreting geological data and confirming title to the Company’s properties, the possibility that future exploration results will not be consistent with Spider’s expectations, increases in costs, environmental compliance and changes in environmental and other local legislation and regulation, interest rate and exchange rate fluctuations, changes in economic and political conditions and other risks involved in the mining industry, as well as those risk factors listed in the “Risk and Uncertainties” section below. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such statements are based on a number of assumptions that may prove to be incorrect, including, but not limited to, assumptions about the following: the availability of financing for Spider’s exploration and development activities; the Company’s operating and exploration costs; its ability to retain and attract skilled staff; timing of the receipt of regulatory and governmental approvals for exploration projects and other operations; market competition; and general business and economic conditions. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Spider’s actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking statements. All forward- looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law. The Company is a reporting issuer under applicable securities legislation in the provinces of Alberta, British Columbia, Ontario and Quebec and its outstanding shares are listed on the TSX Venture Exchange under the symbol “SPQ”. DESCRIPTION OF BUSINESS The Company is an exploration enterprise and carries on business in one segment, being the exploration for valuable minerals, exclusively in Canada. To date, the Company has not earned significant revenues from its exploration rights and is considered to be in the development stage. As such, the Company has applied Accounting Guideline 11, "Enterprises in the Development Stage", from January 1, 1995, which is the date of inception of the development stage. The recoverability of amounts shown as mining interests is dependent upon a number of factors including environmental risk, legal and political risk, the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying properties, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposition thereof. www.spiderresources.com Page 3
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Spider's near term goal is to deliver superior returns to shareholders by concentrating on the acquisition of exploration properties that have the potential to contain valuable mineral deposits. The Company plans to focus on certain of its properties, as set out below under “Mineral Exploration Properties”. OVERALL PERFORMANCE Management is focusing on and developing the “Big Daddy” chromite deposit. The Company's long-term goal is to continue to explore the economic potential of the deposit and consider developing the deposit through to commercial production or to sell its interest at a favourable price once an independent valuation has been determined to ensure fairness in the event of a sale of this strategic asset. KWG Resources Inc. (“KWG”) became operator of the Big Daddy project on April 1, 2010. KWG and Spider each currently hold a 26.5% interest in the Freewest Option Project, which contains the Big Daddy chromite deposit. KWG and Spider each have the right to earn an additional aggregate 7% interest by spending $10 million by March 31, 2012, or by delivering a positive feasibility study on or before March 31, 2012, and related resource definition study on the deposit as part of their earn-in. As operator, KWG has proposed to Spider that KWG and Spider undertake a scoping and related resource definition study on the deposit as part of their earn-in. The details of the proposal have yet to be finalized. See “Subsequent Events” for proposed business combination (“Merger”) between Spider and KWG. While general economic conditions continue to improve and stability appears to be returning to financial and commodity markets, significant uncertainty concerning the short and medium term global economic outlook persists. Management, in conjunction with the Board of Directors, will continue to monitor these developments and their effect on Spider’s business. At March 31, 2010, the Company had assets of $27,211,233 and a net equity position of $23,596,559. This compares with assets of $25,385,224 and a net equity position of $22,765,854 at December 31, 2009. The Company has $199,358 of liabilities and no debt. The Company spent $957,007 during the three months ended March 31, 2010, on exploration activities on its mining interests. At March 31, 2010, the Company had mining interests of $22,928,707, compared to $21,971,700 at December 31, 2009. The majority of expenditures during the three months ended March 31, 2010, were incurred on the Big Daddy chromite deposit. At March 31, 2010, the Company had working capital of $4,083,158, compared to $3,079,360 at December 31, 2009. The Company had cash of $3,731,461 at March 31, 2010, compared to $2,716,778 at December 31, 2009, an increase of about 37%. The increase in cash during the three months ended March 31, 2010, is primarily due to the private placement that closed on January 22, 2010, for total gross proceeds of $1,754,900. Refer to “Liquidity and Capital Resources”, below. The Company plans to spend approximately $1,953,000 resulting from its remaining flow-through commitment at March 31, 2010, associated with its flow-through obligations The Company plans to undertake an expanded exploration program on its projects in the McFaulds Lake area. In particular, KWG and Spider have committed to undertake an exploration program on the Big Daddy chromite deposit under which an aggregate of at least $5 million (Spider’s share - $2.5 million and KWG’s share – $2.5 million) will be spent by March 31, 2011. The details of the proposed program have www.spiderresources.com Page 4
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 yet to be finalized. Spider will also engage in a $100,000 diamond drill program on both the Wawa project and Diagnos Initiative property. The Company has sufficient cash on hand to fund its working capital needs at the current level for the next nine-month period ending in the fourth quarter of fiscal 2010. Refer to “Liquidity and Capital Resources” below. See “Mineral Exploration Properties” below. TRENDS The Company anticipates that it will continue to experience net losses as a result of ongoing exploration of its prospective mineral properties and operating costs until such time as revenue-generating activity is commenced. The Company’s future financial performance is dependent on many external factors. Both the price of and the market for copper, zinc, chromite and diamonds are volatile, difficult to predict, and subject to changes in domestic and international political, social, and economic environments. Circumstances and events such as current economic conditions and ongoing volatility in the capital markets could materially affect the future financial performance of the Company. For a summary of other factors and risks that have affected, and which in future may affect, the Company and its financial position, please refer to the sections entitled “Trends” and “Risks and Uncertainties” in the Company’s management's discussion and analysis for the fiscal year ended December 31, 2009, available on SEDAR at www.sedar.com. MINERAL EXPLORATION PROPERTIES Spider has been exploring in a vast region of Northern Ontario, now referred to as the “Ring of Fire exploration area” and also to the northeast of Lake Superior near the town of Wawa, Ontario. The Company is involved in three project areas in Ontario, known as “Spider #1”, “Spider #3” and “Wawa”. Of these areas, Spider’s main focus remains on the Spider #3 area, which includes the property optioned by Spider and KWG from Freewest Resources Canada Inc. (“Freewest”) where the Company can earn up to a 30% interest, the Diagnos property, where the Company has a 50% interest, the McFaulds Lake property, currently under option to UC Resources Inc. (“UC”), which can earn up to a 55% interest in this property, leaving the Company with 30% interest, and the Kyle property, optioned to Renforth Resources Inc. (“Renforth”), which can earn up to a 55% interest in the property, leaving the Company with 30% interest. The following table outlines Spider’s projects and level of involvement: JV details (potential Property Claims Hectares interest) Commodity sought JV with KWG and Freewest (Spider operator until March Freewest 7 1,280 31, 2010, then KWG is Chrome, nickel, PGMs Option operator) Spider to earn 30% www.spiderresources.com Page 5
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 JV with KWG Diagnos Diamonds, base and 22 3,696 (Spider operator) Initiative precious metals Spider to maintain 50% UC to earn in from McFaulds 51 11,200 Spider/KWG (UC operator) Copper, zinc Project (W) Spider to reduce to 30% McFaulds UC to earn in on project 73 17,088 Copper, zinc Project (E) Spider to reduce to 30% McFaulds UC to earn in on project 13 2,688 Copper, zinc Project (N) Spider to reduce to 30% Renforth to earn in 55% from Spider/KWG Kyle Project 8 2,048 Diamonds (Renforth operator) Spider to reduce to 30% Renforth option to reduce to Renforth 15 3,616 55% Diamonds, base metals claims Spider to earn up to 30% JV with KWG Wawa Project 45 4,500 (Spider operator) Diamonds Spider to earn 66 2/3% JV with KWG MacFadyen 5 672 (KWG operator) Diamonds Project Spider to reduce to 33 1/3 % Spider #3 Project Area (includes McFaulds, Freewest and Diagnos properties) The Spider #3 project area is geographically located immediately west of the Spider #1 project area. The project area includes several identified properties, the McFaulds Lake (East and West) VMS (volcanogenic massive sulphide) properties, the Freewest Option property (chromite and PGEs) and the Diagnos Initiative property. Freewest Option Property This property, located approximately 15 kilometres southwest of the McFaulds Lake VMS property, includes four 16-unit claims, one 12-unit claim and two additional one-unit mineral claims constituting 78 claim units (1,248 hectare property). www.spiderresources.com Page 6
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Under the terms of the original agreement with Freewest, Spider and KWG agreed to spend an aggregate of $3 million on exploration over a four-year period to earn an initial joint 50% interest in the Freewest Option property. Under this agreement Spider and KWG could earn a cumulative joint 60% interest in the property by delivering a bankable feasibility study on any mineralization identified, and subsequently a cumulative joint 65% interest by arranging financing on behalf of Freewest to put the property into commercial production. At present, Spider and KWG have earned an initial 50% interest in the property by jointly expending a total of $3 million, as announced on January 16, 2009. On March 27, 2009, the Company negotiated an amendment to the Freewest Option agreement whereby the option earn-in calls for a $15 million, three-year commitment. As a result of this amendment, the Company no longer is required to prepare a bankable feasibility study within 18 months, as had been called for in the 2005 agreement, upon successful completion of documentation evidencing such amendment and the receipt of all required approvals. Under the amendment, Spider would have a $7.5 million commitment over the next three years, of which $2.5 million was required to be spent before March 31, 2010. Spider announced on September 14, 2009, that it has amended and restated the December 2005 option agreement. During most of fiscal 2008, the Company reported that the main exploration focus of the Spider-KWG joint venture was on the massive chromite occurrence. This deposit underwent significant drill testing during the year, as did other nearby deposits. The Big Daddy deposit is located approximately 3.6 kilometres northeast of Noront’s Eagle One Magmatic Massive Sulphide (nickel, copper and PGM), or five kilometres northeast of Noront’s Blackbird One and Two (chromite) discoveries, and four kilometres southwest of Freewest’s Black Thor and Black Label chromite discoveries. Over the course of 2008 several drill holes intersected economic grade chromite mineralization, but much more work was needed to quantify the resource. It was determined that chromite mineralization consists of varying widths of a variable tenor, in many instances high tenor of chrome, forming a series of stacked beds. Additional drilling was required to confirm continuity of the beds from section to section and to the northeast. The deposit was open to depth as well as along strike in both directions. In addition, near surface drilling of the upward extension to surface had not been completed. A number of faults were noted from the drilling, some of which appeared to occur at the contact of the chromite with the surrounding peridotite/dunite. These fault sets were modeled, as they would likely affect the interpretation and continuity of the mineralization from section to section. During 2009, the main exploration activity of the Spider-KWG joint venture on the Big Daddy chromite deposit was several ground geophysical surveys, designed to outline and delineate the chromium-enriched deposit. The results of the geophysical surveys infer that the earlier drill program, which consisted of 14 drill holes, had only tested the extreme southwest portion of the deposit over a strike length of 400 metres. The gravimetric survey results, when coupled with the magnetic survey results, inferred that the favourable area of mineralization might extend to drill section 20+00NE and beyond. The deposit remained open to depth and was geophysically inferred to extend to the northeast for a further 700 metres. Drilling commenced in the third quarter of 2009 and continued through the fourth quarter and was completed during the first quarter of 2010. On January 7, 2010, the Company reported that diamond drilling on the Big Daddy project had resumed, with the intent to complete drilling sufficient to complete a NI 43-101 compliant resource estimate during Q1 2010. In addition, the company reported results of nine holes from the 2009 drilling at Big Daddy, highlighted by hole FW-09-36, which encountered 86.2 metres of chromite mineralization between 9.8 metres and 96.0 metres downhole. The initial 11.2 metres of chromite mineralization in this hole averaged www.spiderresources.com Page 7
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 40.14% Cr2O3; the last 48.35 metres averages 41.35% Cr2O3. In addition, hole FW-09-33, after passing through 11.0 metres that averaged 40.29% Cr2O3, entered a narrow nickel sulphide filled fault zone that averages 2.74% nickel, 0.12% cobalt and 1.04 g/t Pt+Pd over 1.0 metres. A sample selected for petrographic analysis was determined to contain a low temperature alteration assemblage of minerals including godlevskite along with veinlets of mackinawite, which infers a possible nearby primary nickel source. Eight of the nine holes reported on January 7, 2010, encountered chromite mineralization in excess of 35% Cr2O3 over significant widths. On January 22, 2010, the Company reported results of the remaining six holes from the 2009 drilling at Big Daddy, highlighted by hole FW-09-43, which had encountered two zones of massive chromite mineralization, 24.0 metres averaging 35.75% Cr2O3, as well as 57.0 metres averaging 40.52% Cr2O3, separated by 11.0 metres of thin, massive beds of chromite averaging 15.47% Cr2O3. All six holes reported on this date for Big Daddy encountered chromite mineralization in excess of 35% Cr2O3 over significant widths. Spider also reported that drilling continues, and that it anticipated completion of drilling by the end of January. On February 16, 2010, Spider reported that all priority drillholes for the 2010 program had been completed, and initial analytical results from 2010 drilling were arriving. Hole FW-10-48 encountered two zones of massive chromite mineralization, 14.85 metres averaging 39.52% Cr2O3, as well as 32.4 metres averaging 42.51% Cr2O3. In light of a First Nations blockade on neighbouring projects, negotiations were underway with First Nations communities to resolve a list of issues related to exploration in the general area. The blockade was subsequently removed in March. On March 5, 2010, all analytical results were completed and were reported, highlighted by hole FW-09-50, which had encountered chromite mineralized envelope of 126.3 metres, of which 63.3 metres averaged 41.93% Cr2O3 with Cr:Fe ratio of 1.96. As well, seven of the final eight holes encountered grades in excess of 35% Cr2O3. A National Instrument 43-101 compliant resource estimate was to commence on the Big Daddy chromite deposit. In early March 2010, Spider engaged Micon International Ltd. to complete a National Instrument 43-101 compliant resource estimate on the Big Daddy Deposit. Micon had much earlier visited the project site on two occasions and had been monitoring project progress for nearly one year, having previously reported on the project one year earlier. On May 3, 2010, Spider announced the initial resource estimate for the Big Daddy chrome deposit. Micon estimates that within the Massive Chromite Domain Big Daddy is estimated to contain an indicated resource of 23.2 million tonnes averaging 40.66% Cr2O3, additional inferred resource of 16.3 million tonnes averaging 39.09% Cr2O3. Spider’s expenditure on this project for Q1 2010 amounted to $946,253. www.spiderresources.com Page 8
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Diagnos Initiative Properties These properties are prospective for kimberlite and are located in the vicinity of the Kyle properties in the James Bay Lowlands area of Northern Ontario. The properties were acquired by staking and by a purchase agreement in 2005. During the first quarter of 2006 the Company completed ground geophysical surveying on the six properties. This exploration work has been compiled and interpreted as required for drill positioning, and the Company has presented the results to its joint venture partner for discussion and planning. The Company intends to continue the review of the geophysical results and make plans for drilling selected anomalies during fiscal 2010. Consequently, discretionary exploration expenses for 2010 have been allocated to this project. A few of the claims involved in this project lapsed during Q1 2010 but were subsequently restaked. No exploration work was completed on this project during Q1 2010. The cost of this program, if undertaken, will be shared equally with KWG. It is anticipated that one target will be drill-tested during 2010 on this project at an estimated cost of $200,000. Spider is responsible for 50% of the cost of this program. McFaulds Lake VMS Properties This project covers three properties, the McFaulds (East) property, the McFaulds (West) property and the McFaulds (North) property (the latter property is located north of McFaulds (East) property). Collectively, these volcanogenic massive sulphide (VMS) properties cover approximately 31,000 hectares and are located in the western portion of the James Bay Lowlands. The VMS potential of this diamond exploration project became apparent in 2002 while the company was exploring in joint venture with De Beers Canada Exploration Limited. As a result of the discovery of VMS-style mineralization, the Company and its joint venture partner, KWG, completed several exploration campaigns, including diamond drilling programs, during the period 2003 to early 2007, outlining several VMS-style occurrences, including two where definition drilling was completed (McFaulds #1 and #3 VMS occurrences). On March 7, 2007, the Company announced the signing of a letter of intent with UC regarding a four-year exploration program on the McFaulds Lake project. This LOI outlined the terms and conditions upon which UC has an option to earn-in up to a 55% undivided interest in the McFaulds Lake project, leaving 45% to be shared pro rata by the Company and KWG. This agreement was amended in March 2009. To date, UC has earned a 40% interest in the project and upon spending an additional $1.25 million prior to the fourth anniversary (prior to March 2011), UC can earn the entirety of its 55% interest. Then the option agreement would be fulfilled and a formal joint venture would be entered into, with UC holding 55% interest and the Company and KWG holding the remaining 45% interest. The Company would then start spending during the KWG dilution phase, during which KWG’s interest can be reduced to 15%, leaving the Company with 30%, after which all parties contribute pro rata or undergo additional dilution. During the latter part of 2008, Scott Wilson Roscoe Postle Associates Inc. completed a review of the historical drilling on the McFaulds #1 and #3 occurrences and provided indicated and inferred resource estimates for the two occurrences. The estimates were included in a technical report that was independently prepared and filed on SEDAR in the third quarter of 2008. The following is a summary only, the reader is referred to the full report, “UPDATED TECHNICAL REPORT ON THE MCFAULDS LAKE PROJECT PORCUPINE MINING DIVISION JAMES BAY LOWLAND, ONTARIO, CANADA”, which may be viewed on SEDAR at www.sedar.com. The following tables provide details of the resource estimates: www.spiderresources.com Page 9
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Spider Resources – McFaulds 3 Deposit Indicated Resources Location Tonnes % Cu % Zn Copper-Zinc Domain 802,000 3.75 1.1 Total, Indicated 802,000 3.75 1.1 Notes: 1. CIM definitions were followed for mineral resources. 2. Mineral resources are estimated at cutoff grades of 1.5% Cu 3. Mineral resources are estimated using an average long-term copper price of US$2.50 per pound. 4. A minimum mining width of two metres was used. Spider Resources – McFaulds 1 Deposit Inferred Resources Location Tonnes % Cu % Zn Copper Domain 279,000 2.13 0.58 Zinc Domain 560,700 0.48 3.27 Total, Inferred 839,700 1.03 2.38 Notes: 1. CIM definitions were followed for mineral resources. 2. Mineral resources are estimated at cutoff grades of 1.5% Cu and 1% Zn 3. Mineral resources are estimated using an average long-term copper price of US$2.50 per pound. 4. A minimum mining width of two metres was used. At present the McFaulds Lake project area is the focus of attention as a result of some very encouraging news by other explorers in the region; namely Noront and its exploration/pre-feasibility activities related to the magmatic massive sulphide (“MMS”) Eagle’s Nest Deposit located 27.4 km to the west-southwest of the two main McFaulds Lake VMS occurrences. The MMS style mineralization encountered by Noront contains appreciable copper, nickel, platinum, palladium and gold. Much attention is also being given to Noront’s JJ gold occurrence located a few kilometres to the west of the Eagle’s Nest, as well as the chromite potential of the area as noted in the discovery of the Blackbird deposits (of Noront), the Black Label/Black Thor of Cliffs (Freewest) and the Company’s Big Daddy. Noront has also identified Vanadium in their Thunderbird deposit. The geophysical anomalies associated with all these type of occurrences are slightly different than those of VMS-style mineralization that was the original focus of the McFaulds Lake project. Consequently, the historical geophysics over the McFaulds Lake projects (E and W) are undergoing review by UC to ascertain whether there are similar-looking anomalies on this option property. Spider’s management is assisting in this review and planning process. www.spiderresources.com Page 10
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 UC completed several holes during 2009, none of which encountered significant mineralization; however, some of the drill results and geophysical work were intriguing. The results of the UC 2009 program were reviewed in Q1 2010 and will continue to be subject of review by Spider management during Q2 2010. Because this project is currently funded by UC, Spider has no financial requirements for it during fiscal 2010. Furthermore, information concerning the work done on the property by UC has been provided to Spider by UC. While management of Spider believes this information to be correct, it has relied on UC in respect of the information provided. Spider #1 Project Area (includes Kyle and MacFadyen properties) The Spider #1 project is a regional reconnaissance project located on the western edge of the James Bay Lowlands in northern Ontario. The project was initiated in the early 1990s to explore diamond bearing kimberlite bodies. The project encompasses numerous identified kimberlite occurrences and two distinct project areas, the Kyle project and the MacFadyen project. The project area (except for the Kyle Lake #1 kimberlite) is subject to an agreement whereby Ashton Mining of Canada may acquire a 25% interest under certain conditions. The Company maintains an interest in a minimum number of claims that effectively cover the identified kimberlites. The Kyle properties are currently the subject of an option agreement with Renforth Resources Inc., whereby Renforth can earn up to a 55% interest in the Kyle properties. Kyle Properties These properties consist of five diamondiferous kimberlites, including Kyle Lake #1 and Kyle #3, both of which have undergone mini-bulk testing in earlier exploration campaigns by the Company. Kyle 2, 4 and 5 properties require additional exploration work, having been the subject of only preliminary drilling in 1994 and 1995 by the Company. These properties are currently subject to an option agreement with Renforth whereby Renforth can earn up to a 55% interest. In order to earn its interest, Renforth was to make an aggregate of $6 million in exploration expenditures by June 30, 2009, with annual exploration expenditure requirements of $2.0 million. The option agreement was amended in 2007 whereby Renforth advised that it failed to complete the minimum expenditure due by June 30, 2007, and requested an amendment whereby it could make payment in lieu of expenditures. Both Spider and KWG agreed to the amendment. Renforth sought and received a one-year extension on the next work commitment that was due on June 30, 2008. In partial payment for these concessions, Renforth agreed to pay Spider and KWG shares valued at $1.0 million, to be shared in a pro rata manner between Spider and KWG, the levels to be reflective of each party’s current interest. At the date of this MD&A, Spider has not received the Renforth shares, although Renforth has advised that it intends to deliver the shares. In addition, Renforth must contribute all of its existing claim holdings (15 claims covering 3,616 hectares) in the Attawapiskat River area, to be added to the Kyle project area. Spider/KWG will retain a collective 45% in the Kyle properties once Renforth has earned its 55% interest, and Renforth will transfer a 45% interest in its own properties in the project area to Spider/KWG. No less than 75% of the annual $2 million expenditure must be dedicated to the Kyle properties in order for Renforth to acquire its 55% interest. Renforth agreed to fund the project in its entirety for the first three years and as such, is the operator during the earn-in option period. www.spiderresources.com Page 11
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Pursuant to the revision to the Spider/KWG joint venture dated May 12, 2006, KWG agreed to not contribute further to Spider’s exploration program on the Kyle kimberlite project and as such appointed Spider as manager. In May 2006, both parties were deemed to have a 50% interest in the Kyle kimberlite project. Once Renforth has earned its 55% interest in the project, the underlying agreement terms will apply to Spider and KWG in determination of their respective interests. No work was reported on this project by Renforth during Q1 2010. As a result of this project being funded by Renforth’s earn-in agreement, Spider expects to only contribute a minor amount of the spending. Furthermore, information concerning the work done on the property by Renforth has been provided to Spider by Renforth. While management of Spider believes this information to be correct, it has relied on Renforth in respect of the information provided. MacFadyen Property This property includes three diamond-bearing kimberlites (MacFadyen-1, MacFadyen-2 and Good Friday) located eight kilometres north of the Victor Diamond Mine project of De Beers Canada Explorations Inc. that commenced full production in August 2008. The Company announced in May 2006 that under a revision to the joint venture with KWG, the Company had permitted its interest level to be diluted to one-third, allowing KWG to expend sufficient funds on its own to obtain up to two-thirds. An exploration agreement was negotiated with the Attawapiskat First Nation covering further exploration programs to be undertaken at the property by KWG over the next two years. Upon its signing, KWG commenced a reconnaissance program in September 2006, and made preparations for a winter drilling program to sample each of the five kimberlite pipes that constitute the MacFadyen cluster. Initial results of the kimberlite processing of a drilling program carried out by KWG were reported on June 21, 2007, when KWG announced that a 0.23 quarter-carat diamond had been recovered from one of its MacFadyen kimberlite samples. Bulk sample processing and diamond sorting and picking were executed at the SGS Lakefield Research Laboratory in Lakefield, Ontario. No work has been reported by KWG on this project during Q1 2010. As a result of this project being the focus of KWG until Spider is diluted to a one-third interest, Spider does not expect to expend any funds on it in the near future. Project #6 Wawa Diamond Property This project is located 35 km north of Wawa in central Ontario on the northeast shore of Lake Superior along the Trans-Canada Highway (Hwy 17), encompassing 44.2 square kilometres. The property encompasses several diamond occurrences in lamprophyre dykes, one of which was drill tested in October 2008 by four short HQ holes totaling 307 metres. These holes were designed to undercut a lamprophyre dyke that hosts numerous diamond bearing xenoliths. This dyke had been previously exposed in 2004/2005 by mechanical stripping over a strike length in excess of 300 metres. Some 42 samples were collected and submitted to SGS Lakefield for caustic dissolution diamond analysis. These samples were processed during Q3 2009. www.spiderresources.com Page 12
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Subsequent to the end of Q3 2009, the Company received micro-diamond results pertaining to the four holes drilled during 2008. Highlights of the caustic dissolution test results included the recovery of a total of 1,095 diamonds from 336 kilograms of xenolith bearing lamprophyre dyke core selected from four diamond drill holes. Of these, eight diamonds were retained on a +0.425 mm sieve, 45 were retained on a +0.300 mm sieve, 140 were retained on a +0.212 mm sieve, 301 were retained on a +0.150 mm sieve and 601 were retained on a +0.106 mm screen. Five of the 8-kilogram samples, in which the number of xenoliths ranged between 6 and 10 in the sample interval, had a group weight for only those diamonds retained on +425 mm screen of 0.01339 carats (equating to 0.33 carats per tonne for 40 kilogram of selected samples). Additional work is being considered for the summer of 2010 to follow up on these encouraging results. Spider’s expenditure on this project for Q1 2010 amounted to $10,754. Following are plans related to the Company’s properties for fiscal 2010. Planned expenditures for fiscal 2010 have been estimated based upon expenditure requirements. Timing for Project/Property Plans for Completion Planned Remaining Name Project of Planned Remaining Expenditures Expenditures Activities Commitment (rounded) Exploration with intent March 31, Freewest Option $2,500,000 $1,554,000 $2,500,000 (1) to define 2011 resource Diamond Diagnos Initiative $100,000 (2) Q4 ‘10 $100,000 $0 drilling UC to McFaulds continue its $0 NA $0 $0 Project (W) earn-in UC to McFaulds continues $0 NA $0 $0 Project (E) its earn-in UC to McFaulds continue its $0 NA $0 $0 Project (N) earn-in Kyle Project Renforth to continue its $0 NA $0 $0 Renforth claims earn-in Diamond Wawa Project $100,000 Q4 ‘10 $89,000 $0 drilling MacFadyen KWG to $0 NA $0 $0 www.spiderresources.com Page 13
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Project continue its earn-in to 66.6% (1) Additional $2,500,000 to be completed by March 31, 2012; and (2) Exploration budget of $200,000 - Spider is responsible for 50% of the cost of the program. TECHNICAL DISCLOSURE Mr. Neil Novak, P.Geo., President, Chief Executive Officer and director of the Company, is a Qualified Person as defined under National Instrument 43-101. Mr. Novak has reviewed and verified the technical information in this MD&A. ENVIRONMENTAL LIABILITIES The Company is not aware of any environmental liabilities or obligations associated with its mining interests. The Company is conducting its operations in a manner that is consistent with governing environmental legislation. Pertaining to the Freewest Option project, AECOM has been retained by the project operator to commence an environmental base line study. OVERALL OBJECTIVE The Company’s business objective is to discover a viable mineral deposit, more specifically copper, zinc, chromite and diamonds, on a property in which it holds an interest. The Company is in the business of exploring its mining interests and has not yet determined whether these properties contain an economic mineral deposit. The recoverability of the amounts shown for mining interests is dependent upon: the selling price of copper, zinc, chromite and diamonds or any other commodity that is discovered at the time the Company intends to mine its properties; the existence of economically recoverable reserves; the ability of the Company to obtain the necessary financing to complete exploration and development; government policies and regulations; and future profitable production or proceeds from disposition of such properties. To date, the Company has not discovered an economic deposit. While discovery of ore-bearing structures may result in substantial rewards, it should be noted that few properties that are explored are ultimately developed into producing mines. The Company notes that although the exploration of its existing projects is positive, mineral exploration in general is uncertain. As a result, the Company believes that by acquiring additional mineral properties, it is able to better minimize overall exploration risk. In conducting its search for additional mineral properties, the Company may consider acquiring properties that it considers prospective based on criteria such as the exploration history of the properties, the location of the properties, or a combination of these and other factors. Risk factors to be considered in connection with the Company’s search for and acquisition of additional mineral properties include the significant expenses required to locate and establish mineral reserves; the fact that expenditures made by the Company may not result in discoveries of commercial quantities of minerals; environmental risks; risks associated with land title; the competition faced by the Company; and the potential failure of the Company to generate adequate funding for any such acquisitions. See “Risks and Uncertainties” below. www.spiderresources.com Page 14
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 SUMMARY OF QUARTERLY RESULTS First Fourth Third Second Quarter Quarter Quarter Quarter March 31, December 31, September 30, June 30, 2010 2009 2009 2009 Revenue (including interest and other income) $91,058 $250,943 $0 $0 Expenses $407,859 $534,229 $297,863 $548,549 Gain on sale of marketable securities $0 $0 $0 $0 Future income tax (recovery) $0 ($626,019) $0 $0 ($548,549) Net income (loss) $(316,801) (1) $342,733 (2) ($297,863) (3) (4) Net income (loss) per share basic ($0.00) $0.00 ($0.00) ($0.00) Net income (loss) per share diluted ($0.00) $0.00 ($0.00) ($0.00) Cash flows from (used in) operating activities ($257,999) ($244,174) ($368,833) ($140,005) Cash and cash equivalents, end of period $3,731,461 $2,716,778 $3,238,880 $2,261,080 Assets $27,211,223 $25,385,224 $23,567,913 $21,722,068 Long term liabilities $3,415,306 $2,285,206 $2,923,025 $2,923,025 First Fourth Third Second Quarter Quarter Quarter Quarter March 31, December 31, September 30, June 30, 2009 2008 2008 2008 Revenue (including interest income) $0 $0 $0 $0 Expenses $244,598 $732,804 $163,338 $157,892 Gain on sale of marketable securities $0 $0 $0 $0 Future income tax (recovery) $0 ($460,107) $0 $0 ($157,892) Net income (loss) ($244,598) (5) ($272,697) (6) ($163,338) (7) (8) Net income (loss) per share basic ($0.00) ($0.00) ($0.00) ($0.00) Net income (loss) per share diluted ($0.00) ($0.00) ($0.00) ($0.00) Cash flows from (used in) operating activities ($344,908) ($375,190) $59,286 ($370,928) Cash and cash equivalents, end of period $2,631,092 $3,205,855 $4,102,592 $4,602,542 www.spiderresources.com Page 15
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 First Fourth Third Second Quarter Quarter Quarter Quarter March 31, December 31, September 30, June 30, 2010 2009 2009 2009 Assets $22,087,429 $22,417,191 $22,852,916 $22,548,038 Long term liabilities $2,923,025 $2,837,475 $3,392,082 $3,392,082 Notes: (1) The net loss of $316,801 principally relates to (i) professional fees of $75,743; (ii) transfer agent fees of $35,086; (iii) advertising and promotion expenses of $79,719; (iv) consulting fees of $45,000; (v) management fees of $34,500; (vi) and stock-option compensation of $47,917. All other expenses related to general working capital purposes. (2) The net income of $342,733 principally relates to a future income tax recovery of $626,019 and an operator fee of $250,943. These amounts were partly offset by (i) professional fees of $54,641; (ii) advertising and promotion of $38,470; (iii) consulting fees of $108,900; and (iv) stock option compensation of $207,000. All other expenses related to general working capital purposes. (3) The net loss of $297,863 principally relates to (i) professional fees of $62,541; (ii) advertising and promotion of $61,096; and (iii) consulting fees of $40,500. All other expenses related to general working capital purposes. (4) The net loss of $548,549 principally relates to (i) stock-option compensation of $220,100; (ii) consulting fees of $95,800; (iii) shareholder relations expense of $83,219; and (iv) professional fees of $54,450. All other expenses related to general working capital purposes. (5) The net loss of $244,598 principally relates to (i) advertising and promotion of $48,838; (ii) professional fees of $47,870; (iii) consulting fees of $47,083; and (iv) travel of $24,247. All other expenses related to general working capital purposes. (6) The net loss of $272,697 principally relates to (i) stock based compensation of $457,800; (ii) future income tax recovery of $460,107; (iii) professional fees of $60,000; and (iv) consulting fees of $47,500. All other expenses related to general working capital purposes. (7) The net loss of $163,338 principally relates to (i) accounting and corporate services of $37,004; (ii) consulting fees of $32,500; (iii) management fees of $24,011; and (iv) professional fees of $15,030. All other expenses related to general working capital purposes. (8) The net loss of $157,892 principally relates to (i) shareholder relations expense of $50,576; (ii) consulting fees of $25,000; (iii) management fees of $24,000 and (iv) professional fees of $16,060. All other expenses related to general working capital purposes. www.spiderresources.com Page 16
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 RESULTS OF OPERATIONS Three months ended March 31, 2010, compared with three months ended March 31, 2009 The net loss from operations for the three months ended March 31, 2010, was $316,801 or $0.00 per share, compared to net loss of $244,598 or $0.00 for the comparative period in 2009. The $72,203 increase in loss from operations was driven by several variables, including: • The Company incurred a stock-based compensation expense of $47,917 for the three months ended March 31, 2010, compared to the three months ended March 31, 2009 of $nil. The increase can be attributed to the vesting term of 2,000,000 stock options issued on December 21, 2009. These stock options were granted to an investor relations consultant exercisable over a five-year period at a price of $0.10 per share. The fair value of these stock options at the date of the grant was estimated using the Black-Scholes valuation model with the following assumptions: a five- year expected term; 167% volatility; risk-free interest rate of 2.57% per annum; and a dividend rate of 0%. The fair value assigned to these incentive stock options was $92,000. These stock options will vest quarterly over a period of one year. There were no stock options granted during the three months ended March 31, 2009. Several variables are used when determining the value of stock options using the Black-Scholes valuation model: o The expected term: the Company used the expected term of five years, which is the maximum term ascribed to these stock options, for the purposes of calculating their value. The Company chose the maximum term because it is difficult to determine with any reasonable degree of accuracy when these stock options will be exercised. o Volatility: the Company used historical information on the market price of its common shares to determine the degree of volatility at the date the stock options were granted. Therefore, depending on when the stock options were granted and the period of historical information examined, the degree of volatility can be different when calculating the value of different incentive stock options. o Risk-free interest rate: the Company used the interest rate available for government securities of an equivalent expected term as at the date of the grant of the stock options. The risk-free interest rate would vary depending on the date of the grant of the stock options and their expected term. o Dividend yield: the Company has not paid dividends in the past because it is in the development stage and has not yet earned any significant income. Also, the Company does not expect to pay dividends in the foreseeable future because it does not expect to bring its mineral properties into production and earn significant revenue any time soon. Therefore, a dividend rate of 0% was used for the purposes of the valuation of the incentive stock options. Incentive stock options are issued to attract key personnel to work for the Company. • Professional fees during the three months ended March 31, 2010, were $75,743 (three months ended March 31, 2009 - $47,870). The increase of $27,873 resulted from an increase in services provided by legal counsel in relation to increased corporate activity during the three months ended March 31, 2010, compared to the corresponding period in 2009. www.spiderresources.com Page 17
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 • The $9,796 increase in general and administration expenses for the three months ended March 31, 2010, over the comparative period in 2009 is due to director fees of $7,250 incurred in Q1 2010 compared to $nil in the comparative period. • Advertising and promotion expense increased by $30,881 during the three months ended March 31, 2010, over the comparative period in 2009 as a result of investor relation expenditures and increased corporate activity. • The increase in transfer agent, listing and filing fees of $28,396 during the three months ended March 31, 2010, compared to the year-earlier three months is a result of higher reporting issuer costs incurred in Q1 2010 compared to Q1 2009. • Management fees during the three months ended March 31, 2010, were $34,500 compared to the three months ended March 31, 2009, of $24,000. The monthly payment to the Chief Executive Officer of the Company has increased from $8,000 to $11,500. • The increase in interest and bank charges of $8,077 consists of an $8,000 accrual for Part XII.6 tax (Canada) on the Company’s flow-through obligation in Q1 2010 compared to Q1 2009. • Other expense fluctuations can be related to small variances seen in accounting and corporate services, interest and bank charges, travel, occupancy costs, consulting fees and insurance. LIQUIDITY AND CAPITAL RESOURCES The activities of the Company, principally the acquisition and exploration of properties that have the potential to contain metals, are financed through the completion of equity transactions such as equity offerings and the exercise of incentive stock options, agent options and warrants. For the three months ended March 31, 2010, the Company had the following equity transaction: • On January 22, 2010, the Company completed a private placement where an aggregate of 9,823,336 flow-through units, at a price of $0.06 per unit, and 23,310,000 non-flow-through units at price of $0.05 per unit, were issued to subscribers for aggregate proceeds of $1,754,900. Each flow-through unit consists of one common share (issued on a flow-through basis) and one common share purchase warrant (non-flow-through). Each non-flow-through unit consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.10 for a period of two years from date of issue. Spider issued non-transferable compensation options (the “Agent Options”) to purchase up to 3,313,334 Units (the “Agent Units”), of which 982,334 Agent Units are exercisable at an exercise price of $0.06 per Agent Unit and 2,331,000 Agent Units are exercisable at an exercise price of $0.05 per Agent Unit. The Agent Options are exercisable at any time before 5:00 p.m. (Toronto time) on January 22, 2012. Each Agent Unit consists of one common share and one common share purchase warrant exercisable to acquire one common share at an exercise price of $0.10 per share on or before 5:00 p.m. (Toronto time) on the day that is 24 months from January 22, 2010. www.spiderresources.com Page 18
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 The securities issued under the private placement were subject to a hold period from the date of issuance until May 23, 2010, in accordance with applicable securities laws and TSX Venture Exchange policies. • On January 12, 2010, a total of 2,500,000 warrants were exercised for 2,500,000 common shares of Spider at $0.05 per share for gross proceeds of $125,000. • On March 16, 2010, total of 1,111,000 warrants were exercised for 1,111,000 common shares of Spider at $0.10 per share for gross proceeds of $111,100. In addition, a total of 200,000 warrants were exercised for 200,000 common shares of Spider at $0.05 per share for gross proceeds of $10,000. • On March 17, 2010, a total of 161,666 warrants were exercised for 161,666 common shares of Spider at $0.05 per share for gross proceeds of $8,083. • On March 18, 2010, a total of 1,500,000 warrants were exercised for 1,500,000 common shares of Spider at $0.05 per share for gross proceeds of $75,000. In addition, a total of 150,000 warrants were exercised for 150,000 common shares of Spider at $0.03 per share for gross proceeds of $4,500. • On March 19, 2010, a total of 2,800,001 warrants were exercised for 2,800,001 common shares of Spider at $0.03 per share for gross proceeds of $84,000. In addition, a total of 416,666 warrants were exercised for 416,666 common shares of Spider at $0.05 per share for gross proceeds of $20,833. • On March 22, 2010, a total of 833,333 warrants were exercised for 833,333 common shares of Spider at $0.05 per share for gross proceeds of $41,667. There is no assurance that future equity capital will be available to the Company in the amounts or at the times desired or on terms that are acceptable to the Company, if at all. See “Risks and Uncertainties” below. The Company has no operating revenues and therefore must utilize its current cash reserves, funds obtained from the exercise of warrants, stock options, agent options, and other financing transactions to maintain its capacity to meet ongoing discretionary and committed exploration and operating activities. As of March 31, 2010, the Company had 471,194,433 common shares issued and outstanding, 140,217,328 warrants outstanding which would raise $12,368,883 if exercised in full, and 40,318,515 incentive stock options and agent options outstanding which would raise $3,556,202 if exercised in full. To date, the cash resources of Spider are held with HSBC Bank Canada. The Company has no debt and its credit and interest rate risk is minimal. Accounts payable and accrued liabilities are short-term and non- interest bearing. The Company’s liquidity risk with financial instruments is minimal as excess cash is invested in investment grade short-term deposit certificates. As of March 31, 2010, the Company’s funds were in two non-interest bearing accounts. The Company did not have any investments as of March 31, 2010. www.spiderresources.com Page 19
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 In addition, sundry receivables are composed of sales tax receivable from government authorities in Canada and deposits held with service providers. Accounts payable and accrued liabilities decreased to $199,358 at March 31, 2010, compared to $334,164 at December 31, 2009, primarily due to less accounts payable at March 31, 2010, compared to December 31, 2009. The Company’s cash as at March 31, 2010, is sufficient to pay these liabilities. The Company’s use of cash at present occurs, and in the future will occur, principally in two areas, namely, funding of its general and administrative expenditures and funding of its investment activities. Those investing activities include the cash components of the cost of acquiring and exploring its mineral claims. Currently, the Company’s operating expenses are averaging approximately $120,000 per month for working capital related expenses. The Company also plans to incur exploration expenditures of $2,700,000 on its mining interests. Of this, $2,500,000 relates to the Big Daddy chromite deposit and must be spent by March 31, 2011 ($946,000 spent (rounded)); about $200,000 relates to other mining interests, and which the Company anticipates spending by December 31, 2010 ($11,000 spent (rounded)). See “Mineral Exploration Properties”, above. The Company’s existing funds on hand at March 31, 2010, are anticipated to be adequate for Spider to meet its working capital needs at the current level for the next nine-month period ending in the fourth quarter of fiscal 2010. This is subject to the Company’s ability to attract and retain skilled staff and consultants. The Company’s anticipated spending includes its flow-through commitment of approximately $1,953,000. The flow-through obligations from fiscal 2009 are required to be spent by December 31, 2010, under the Canadian tax rules regarding flow-through shares. The Company can elect to spend the January 22, 2010, flow-through financing by December 31, 2011, under the same tax rules. The decision where to spend the remaining $210,000 flow-through commitment from the January 22, 2010, flow-through financing will be determined by management in due course. OFF-BALANCE-SHEET ARRANGEMENTS As of the date of this filing, the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity and capital resources. PROPOSED TRANSACTIONS There are no proposed transactions of a material nature being considered by the Company. However, the Company continues to evaluate properties and corporate entities that it may acquire in the future. See “Overall Objective” above TRANSACTIONS WITH RELATED PARTIES During the three months ended March 31, 2010, the Company paid $34,500 (three months ended March 31, 2009 - $24,000) to Nominex Ltd., a company controlled by Neil Novak, the President and director of the Company, for geological and other services. Included in accounts payable and accrued liabilities is $12,075 (December 31, 2009 - $8,400) owing to Nominex for management services provided. The Company paid Richard Hamelin, the Vice President of the Company, fees totaling $22,500 for the three months ended March 31, 2010 (three months ended March 31, 2009 - $18,000). www.spiderresources.com Page 20
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 For the three months ended March 31, 2010, legal fees in the amount of $76,553 (three months ended March 31, 2009 - $55,439) were paid to a law firm in which the Corporate Secretary, Carmen Diges, is a partner. As at March 31, 2010, this law firm was owed $76,553 (December 31, 2009 - $205,496) and this amount was included in accounts payable and accrued liabilities. For the three months ended March 31, 2010, the Company paid $7,500 (three months ended March 31, 2009 - $7,500) to Marrelli CFO Outsource Syndicate Inc. ("Marrelli") for the services of Carmelo Marrelli to act as Chief Financial Officer of the Company. The Company's Chief Financial Officer is the president of Marrelli and Marrelli Support Services Inc., a firm that provides accounting services to Spider. During the three months ended March 31, 2010, Spider expensed $21,103 (three months ended March 31, 2009 - $14,173) for services rendered by this firm. In addition, as at March 31, 2010, this firm was owed $12,618 (December 31, 2009 - $15,860) and this amount was included in accounts payable and accrued liabilities. During the three months ended March 31, 2010, the Company paid consulting fees of $15,000 (three months ended March 31, 2009 - $nil) to James G. Burns, an officer of the Company. As at March 31, 2010, this officer was owed $10,817 (December 31, 2009 - $6,719) and this amount was included in accounts payable and accrued liabilities. As at March 31, 2010, Franklin Geosciences Ltd. was owed $nil (December 31, 2009 - $24,780) in outstanding consulting fees and unreimbursed expenses. This amount was included in accounts payable and accrued liabilities. Franklin Geosciences Ltd. is a company beneficially owned by Jim Franklin, a director of the Company. During the three months ended March 31, 2010, the Company paid $7,250 (three months ended March 31, 2009 - $nil) as director fees. Director fees include payments to Earl Coleman - $1,750; Norman Brewster - $1,500; Bryan Wilson $1,250; Jim Franklin $1,500; and Gregory Roberts - $1,250). As at March 31, 2010, $15,146 (December 31, 2009 - $5,856) was owed to two directors as reimbursable expenses and this amount was included in accounts payable and accrued liabilities (March 31, 2010: Neil Novak - $13,063 and Earl Coleman - $2,083) (March 31, 2009 - Neil Novak - $5,856). These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. CRITICAL ACCOUNTING ESTIMATES The preparation of the Company’s unaudited interim financial statements requires management to make certain estimates that affect the amounts reported in the financial statements. The accounting estimates considered significant are the valuation of the Company’s mining interests, warrants and stock-based compensation. The policy of capitalizing exploration costs to date does not necessarily relate to the future economic value of the exploration properties. The valuation of mining interests is dependent entirely upon the discovery of economic mineral deposits. The Company uses the Black-Scholes model to determine the fair value of stock options and warrants. The main factor affecting the estimates of stock-based compensation and warrants is the stock price volatility used. The Company uses historical price data and comparables in the estimate of future volatility. www.spiderresources.com Page 21
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Changes in the accounting estimates in the items discussed above may have a material impact on the financial position of the Company. Other items requiring estimates for the three months ended March 31, 2010, are accounts payable and accrued liabilities and asset retirement obligation. Changes in the accounting estimates in these items may have a material impact on the financial position of the Company. FUTURE ACCOUNTING CHANGES Business Combinations, Consolidated Financial Statements and Non-Controlling Interests The CICA issued three new accounting standards in January 2009: Section 1582, "Business Combinations", Section 1601, "Consolidated Financial Statements" and Section 1602, "Non-Controlling interests". These new standards will be effective for fiscal years beginning on or after January 1, 2011. Section 1582 replaces section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to IFRS 3 - Business Combinations. Sections 1601 and 1602 together replace section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS IAS 27 - Consolidated and Separate Financial Statements. The Company is in the process of evaluating the requirements of the new standards. International Financial Reporting Standards (“IFRS”) The Canadian Accounting Standards Board has confirmed that IFRS will replace current Canadian GAAP for publicly accountable enterprises, including the Company, effective for fiscal years beginning on or after January 1, 2011. Accordingly, the Company will report interim and annual financial statements in accordance with IFRS beginning with the quarter ended March 31, 2011. The Company's 2011 interim and annual financial statements will include comparative 2010 financial statements, adjusted to comply with IFRS. IFRS Transition Plan The Company has established a comprehensive IFRS transition plan and engaged third-party advisers to assist with the planning and implementation of its transition to IFRS. The following summarizes the Company's progress and expectations with respect to its IFRS transition plan: Initial scoping and analysis of key areas for which accounting policies may be impacted by the transition to IFRS. Complete. Detailed evaluation of potential changes required to accounting policies, information systems and business processes, including the application of IFRS 1 First-time Adoption of International Financial Reporting Complete. www.spiderresources.com Page 22
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Standards. Final determination of changes to accounting policies and choices to be made with respect to first-time adoption In progress, completion expected during alternatives. Q2 2010 Resolution of the accounting policy change implications on information technology, business processes and In progress, completion expected during contractual arrangements. Q3 2010 Quantification of the financial statement impact of changes in accounting policies. Throughout 2010 Management and employee education and Throughout the transition process training. Impact of Adopting IFRS on the Company’s Business As part of its analysis of potential changes to significant accounting policies, the Company is assessing what changes may be required to its accounting systems and business processes. The Company believes that the changes identified to date are minimal and the systems and processes can accommodate the necessary changes. To date, the Company has not identified any contractual arrangements that may be affected by potential changes to significant accounting policies. The Company's staff and advisers involved in the preparation of the financial statements are being trained on the relevant aspects of IFRS and the anticipated changes to accounting policies. Employees of the Company who will be affected by a change to business processes as a result of the conversion to IFRS will also be trained as necessary. The Board of Directors and the Audit Committee have been regularly updated on the progress of the IFRS conversion plan, and made aware of the evaluation to date of the key aspects of IFRS affecting the Company. First-time adoption of IFRS The adoption of IFRS requires the application of IFRS 1 First-time Adoption of International Financial Reporting Standards (“IFRS 1”), which provides guidance for an entity’s initial adoption of IFRS. IFRS 1 generally requires retrospective application of IFRS, effective at the end of its first annual IFRS reporting period. However, IFRS 1 also provides certain optional exemptions and mandatory exceptions to this retrospective treatment. The Company has identified the following optional exemptions that it expects apply in its preparation of an opening IFRS statement of financial position as at January 1, 2010, its transition date: • To apply IFRS 2 Share-based Payments only to equity instruments issued after November 7, 2002, and that had not vested by the transition date. www.spiderresources.com Page 23
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 • To apply IFRS 3 Business Combinations prospectively from the transition date, therefore not restating business combinations that took place prior to the transition date. • To apply the transition provisions of IFRIC 4 Determining whether an Arrangement Contains a Lease, therefore determining if arrangements existing at the transition date contain a lease based on the circumstances existing at that date. • To apply IAS 23 Borrowing Costs prospectively from the transition date. IAS 23 requires the capitalization of borrowing costs directly attributable to the acquisition, production or construction of certain assets. Prior to reporting interim financial statements in accordance with IFRS for the quarter ending March 31, 2011, the Company may decide to apply other optional exemptions contained in IFRS 1. IFRS 1 does not permit changes to estimates that have been made previously. Accordingly, estimates used in the preparation of the Company’s opening IFRS statement of financial position as at the transition date will be consistent with those made under current Canadian GAAP. If necessary, estimates will be adjusted to reflect any difference in accounting policy. Impact of Adopting IFRS on the Company’s Financial Statements The adoption of IFRS will result in some changes to the Company's accounting policies that are applied in the recognition, measurement and disclosure of balances and transactions in its financial statements. The following provides a summary of the Company's evaluation to date of potential changes to accounting policies in key areas based on the current standards and guidance within IFRS. This is not intended to be a complete list of areas where the adoption of IFRS will require a change in accounting policies, but to highlight the areas the Company has identified as having the most potential for a significant change. The International Accounting Standards Board has a number of ongoing projects, the outcome of which may have an effect on the changes required to the Company’s accounting policies on adoption of IFRS. At the present time, however, the Company is not aware of any significant expected changes prior to its adoption of IFRS that would affect the summary provided below. 1) Exploration and Evaluation Expenditures Subject to certain conditions, IFRS currently allows an entity to determine an accounting policy that specifies the treatment of costs related to the exploration for and evaluation of mineral properties. The Company expects to establish an accounting policy to expense, as incurred, all costs relating to exploration and evaluation until such time as it has been determined that a property has economically recoverable reserves. The application of this policy on the adoption of IFRS will have a significant impact on the Company’s financial statements. On adoption of IFRS, the carrying value of the mineral resource properties will be reduced to zero (as at the transition date), with a corresponding adjustment to accumulated deficit. All subsequent exploration and evaluation costs will be expensed as incurred until such time as it has been determined that a property has economically recoverable reserves. www.spiderresources.com Page 24
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 2) Impairment of (Non-financial) Assets IFRS requires a write down of assets if the higher of the fair market value and the value in use of a group of assets is less than its carrying value. Value in use is determined using discounted estimated future cash flows. Current Canadian GAAP requires a write down to estimated fair value only if the undiscounted estimated future cash flows of a group of assets are less than its carrying value. The Company's accounting policies related to impairment of non-financial assets will be changed to reflect these differences. However, the Company does not expect that this change will have an immediate impact on the carrying value of its assets. The Company will perform impairment assessments in accordance with IFRS at the transition date. 3) Share-based Payments In certain circumstances, IFRS requires a different measurement of stock-based compensation related to stock options than current Canadian GAAP. The Company does not expect any changes to its accounting policies related to share-based payments that would result in a significant change to line items within its financial statements. 4) Asset Retirement Obligations (Decommissioning Liabilities) IFRS requires the recognition of a decommissioning liability for legal or constructive obligations, while current Canadian GAAP only requires the recognition of such liabilities for legal obligations. A constructive obligation exists when an entity has created reasonable expectations that it will take certain actions. The Company's accounting policies related to decommissioning liabilities will be changed to reflect these differences. However, the Company does not expect this change will have an immediate impact on the carrying value of its assets. 5) Property and Equipment IFRS contains different guidance related to recognition and measurement of property and equipment than current Canadian GAAP. The Company does not expect any changes to its accounting policies related to property and equipment that would result in a significant change to line items within its financial statements. 6) Income Taxes In certain circumstances, IFRS contains different requirements related to recognition and measurement of future (deferred) income taxes. The Company does not expect any changes to its accounting policies related to income taxes that would result in a significant change to line items within its financial statements. www.spiderresources.com Page 25
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Subsequent Disclosures Further disclosures of the IFRS transition process are expected as follows: • The Company’s MD&A for the 2010 interim periods and the year ended December 31, 2010, will include updates on the progress of the transition plan, and, to the extent known, further information regarding the impact of adopting IFRS on key line items in the annual financial statements. • The Company's first financial statements prepared in accordance with IFRS will be the interim financial statements for the three months ending March 31, 2011, which will include notes disclosing transitional information and disclosure of new accounting policies under IFRS. The interim financial statements for the three months ending March 31, 2011, will also include 2010 financial statements for the comparative period adjusted to comply with IFRS, and the Company’s transition date IFRS statement of financial position (at January 1, 2010). MANAGEMENT OF CAPITAL The Company’s objective when managing capital is to maintain adequate levels of funding to support the acquisition, exploration and development of mineral properties. The Company considers its capital to be equity, which comprises share capital, warrants, stock options, contributed surplus, and deficit, which at December 31, 2009, totaled $23,596,559 (December 31, 2009 - $22,765,854). The Company manages its capital structure in a manner that provides sufficient funding for acquisition, exploration and development of mineral properties. Funds are primarily secured through equity capital raised by way of private placements. There can be no assurance that the Company will be able to continue raising equity capital in this manner. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the three months ended March 31, 2010. The Company is not subject to externally imposed capital requirements. PROPERTY RISK AND FINANCIAL RISK AFFECTING FINANCIAL INSTRUMENTS (a) Property risk The Company's mining interests are the only properties that are currently material to the Company. Unless the Company acquires or develops additional material properties, it will be solely dependent upon its current mining interests. If no additional mineral properties are acquired by the Company, any adverse development affecting the Company's mining interests would have a material adverse effect on its financial condition and results of operations. www.spiderresources.com Page 26
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 (b) Financial risk The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign exchange rate and commodity and equity price risk). Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. Credit risk Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to sundry receivables. The Company has no significant concentration of credit risk arising from operations. Financial instruments included in sundry receivables consist of sales tax receivable due from government authorities in Canada and deposits held with service providers. Sundry receivables are in good standing as of March 31, 2010. Management believes that the credit risk concentration with respect to financial instruments is minimal. Liquidity risk Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations when they become due, or can only do so at excessive cost. The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at March 31, 2010, the Company had a cash balance of $3,731,461 (December 31, 2009 - $2,716,778) to settle current liabilities of $199,358 (December 31, 2009 - $334,164). All of the Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. The Company is committed to spending eligible exploration expenditures of approximately $1,953,000 resulting from flow-through offerings that were completed in fiscal 2009 and on January 22, 2010. Market risk (i) Interest rate risk Interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. The Company has cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the creditworthiness of its banks. (ii) Foreign currency risk Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using cash flow forecasting. The Company's functional and reporting currency is the Canadian dollar and major purchases are transacted in Canadian dollars. As a result, the Company's exposure to foreign currency risk is minimal. www.spiderresources.com Page 27
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 (iii) Price risk The Company is exposed to price risk with respect to commodity price. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company. (c) Fair Value Hierarchy and Liquidity Risk Disclosure Fair value measurement of assets and liabilities recognized on the balance sheet is categorized into levels within a fair value hierarchy based on the nature of valuations inputs. The Company's cash is classified in Level 1 within the fair value hierarchy as at March 31, 2010. Sensitivity analysis Sundry receivables, which are classified for accounting purposes as loans and receivables, are measured at amortized cost. Accounts payable and accrued liabilities are classified for accounting purposes as other financial liabilities, measured at amortized cost. Due to the short-term nature of these instruments, their carrying value approximates fair value. Fair value represents the amount that would be exchanged in an arm's length transaction between willing parties and is best evidenced by a quoted market price, if one exists. Commodity price risk could adversely affect the Company. In particular, the Company’s future profitability and viability depend upon the world market price of valuable minerals. Commodity prices have fluctuated significantly in recent years. There is no assurance that, even if commercial quantities of valuable minerals are produced in the future, a profitable market will exist for them. As of March 31, 2010, the Company was not a producer of valuable minerals. Even so, commodity price risk may affect the completion of future equity transactions such as equity offerings and the exercise of stock options and warrants. This may also affect the Company's liquidity and its ability to meet its ongoing obligations. DISCLOSURE OF INTERNAL CONTROLS Management has established processes to provide them sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the unaudited interim financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the unaudited interim financial statements; and (ii) the unaudited interim financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented. In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52- 109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of: www.spiderresources.com Page 28
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation. ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE The following table sets forth a breakdown of material components of mining interests for the three months ended March 31, 2010, and the year ended December 31, 2009. Exploration expenditures Projects March 31, December 31, 2010 2009 ($) ($) Spider #1 Opening balance 7,379,737 7,379,737 Geophysics nil nil Closing balance 7,379,737 7,379,737 Wawa Opening balance 1,238,770 1,133,232 Contractor wages 6,540 4,440 Geochemical nil 74,735 Operator costs nil 7,979 License fees 875 18,120 Travel, meals and accommodation 3,339 264 Geophysics nil nil www.spiderresources.com Page 29
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Closing balance 1,249,524 1,238,770 McFaulds Lake Opening balance 6,176,530 5,999,624 Operator costs nil 129,684 Drilling costs nil nil Reversal of fees previously accrued for consulting services nil nil Consulting nil nil Valuation report nil nil Claims staking and maintenance nil nil Travel, accommodation and meals nil 2,865 Geochemical nil nil Other nil nil Geology nil nil Gemcom software nil nil Labour nil nil Transportation nil nil Administration nil nil Rental nil nil First Nations nil nil Camp/lodging/meals/travel nil 44,357 Closing balance 6,176,530 6,176,530 Diagnos Opening balance 66,919 66,919 Geophysics nil nil Closing balance 66,919 66,919 Big Daddy Chromite Deposit Opening balance 4,625,772 1,769,913 Drilling 436,660 1,106,381 Claims staking nil nil Geochemical 201,306 37,161 www.spiderresources.com Page 30
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Meals and lodging 110,419 124,612 Operator costs 45,529 528,245 Travel and fuel 17,117 43,424 Contractor wages 58,394 881,758 Survey 49,164 17,583 Geophysics 10,483 116,695 Administration 17,181 nil Closing balance 5,572,025 4,625,772 Total 20,444,735 19,487,728 Acquisition costs Projects March 31, December 31, 2010 2009 ($) ($) Spider #1 Opening balance 1,983,760 1,983,760 No activity nil nil Closing balance 1,983,760 1,983,760 Wawa Opening balance 466,173 466,173 No activity nil nil Closing balance 466,173 466,173 McFaulds Lake Opening balance nil nil No activity nil nil Closing balance nil nil Diagnos www.spiderresources.com Page 31
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Opening balance 39 39 No activity nil nil Closing balance 39 39 Big Daddy Chromite Deposit Opening balance 34,000 34,000 No activity nil nil Closing balance 34,000 34,000 Total 2,483,972 2,483,972 The following table sets forth a breakdown of material components of administrative expenses of the Company for the three months ended March 31, 2010 and 2009. Administrative Expenses Three Months Ended March 31, March 31, 2010 2009 ($) ($) Accounting, tax and corporate services 19,808 18,721 Shareholder relations 1,552 2,845 Professional fees 75,743 47,870 Management fees 34,500 24,000 Transfer agent, listing and filing fees 35,086 6,690 General and administration 22,418 12,622 Travel 23,927 24,247 Occupancy costs 3,750 3,750 Interest and bank charges 8,449 372 Advertising and promotion 79,719 48,838 Consulting fees 45,000 47,083 Insurance 9,990 7,560 Capital tax - Totals 359,942 244,598 DISCLOSURE OF OUTSTANDING SHARE DATA As of the date of this MD&A, Spider had 483,586,465 common shares issued and outstanding. As of the date of this MD&A, Spider had the following stock options and agent options outstanding: www.spiderresources.com Page 32
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 Number of Options and Exercise Price Expiry Date Agent Options 300,000 $0.10 August 2, 2010 5,085,018 $0.10 February 8, 2011 1,000,000 $0.10 July 25, 2011 (1) 812,499 $0.06 December 24, 2011 (1) 998,962 $0.06 December 30, 2011 (2) 982,334 $0.06 January 22, 2012 (2) 2,331,000 $0.05 January 22, 2012 10,900,000 $0.10 October 2, 2013 7,100,000 $0.10 April 21, 2014 4,500,000 $0.10 December 21, 2014 2,000,000 $0.10 December 21, 2014 36,009,813 (1) 3,261,663 non-transferable agent options entitling the holders to purchase up to 3,261,663 units at a price of $0.06 per unit for a period of two years from the date of issue. Each unit consist of one common share and one common share purchase warrant exercisable to acquire one common share at the price of $0.10 per share for a period of two years from the date of issue of the agent options. The Company issued two tranches of agent options: (i) 2,083,298 units at a price of $0.06 that expire on December 24, 2011 (1,270,799 units exercised). The attached warrants to these options also expire on December 24, 2011; and (ii) 1,536,865 units at a price of $0.06 that expire on December 30, 2011 (537,903 units exercised). The attached warrants to these agent options also expire on December 30, 2011. (2) 3,313,334 units, of which 982,334 agent units are exercisable at an exercise price of $0.06 per agent unit and 2,331,000 agent units are exercisable at an exercise price of $0.05 per agent unit. Each agent unit consists of one common share and one common warrant exercisable to acquire one common share at an exercise price of $0.10 per share in a period of two years from the date of issue. As of the date of this MD&A, Spider had the following warrants outstanding: Number of Exercise Price Expiry Date Warrants (4) 29,389,000 $0.10 October 11, 2010 2,700,000 $0.10 November 27, 2010 470,000 $0.10 November 27, 2010 1,200,000 $0.10 December 30, 2010 (1) 15,388,332 $0.05 - $0.10 July 24, 2011 (2) 1,429,999 $0.03 - $0.06 July 28, 2011 (3) 12,500,000 $0.05 - $0.10 August 7, 2011 24,158,798 $0.10 December 24, 2011 16,323,235 $0.10 December 30, 2011 www.spiderresources.com Page 33
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 8,323,336 $0.10 January 22, 2012 23,310,000 $0.10 January 22, 2012 135,192,700 (1) Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue (July 24, 2010) and thereafter at a price of $0.10 for a period of two years from the date of issue (July 24, 2011). (2) Each broker warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.03 for a period of one year from the date of issue (July 28, 2010) and thereafter at a price of $0.06 for a period of two years from the date of issue (July 28, 2011). (3) Each full warrant entitles the holder to acquire one common share (which share will not be issued on a flow-through basis) at a price of $0.05 for a period of one year from the date of issue (August 7, 2010) and thereafter at a price of $0.10 for a period of two years from the date of issue (August 7, 2011). (4) The TSX Venture Exchange on October 9, 2009, agreed that Spider could amend the terms of the warrants as follows: (i) extend the term of the warrants by one year until October 11, 2010, and (ii) reduce the exercise price of the warrants from $0.175 per share to $0.10 per share. RISKS AND UNCERTAINTIES An investment in the securities of the Company is highly speculative and involves numerous and significant risks. Only investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment should undertake such investment. Prospective investors should carefully consider the risk factors that have affected, and which in the future are reasonably expected to affect, the Company and its financial position. Please refer to the section entitled "Risk and Uncertainties" in the Company's management's discussion and analysis for the fiscal year ended December 31, 2009, available on SEDAR at www.sedar.com. There have been no significant changes to such risk factors since the date thereof. SUBSEQUENT EVENTS (a) On April 6, 2010, a total of 166,666 warrants were exercised for 166,666 common shares of Spider at $0.10 per share for gross proceeds of $16,666. (b) On April 13, 2010, a total of 333,333 warrants were exercised for 333,333 common shares of Spider at $0.05 per share for gross proceeds of $16,667. (c) On April 20, 2010, a total of 1,000,000 warrants were exercised for 1,000,000 common shares of Spider at $0.05 per share for gross proceeds of $50,000. (d) On April 26, 2010, a total of 416,666 warrants were exercised for 416,666 common shares of Spider at $0.05 per share for gross proceeds of $20,833. In addition, a total of 358,500 agent options were exercised for 358,500 common shares of Spider at $0.06 per share for gross proceeds of $21,510 and 358,500 warrants with an exercise price of $0.10 and expiry date of December 24, 2011, were issued. www.spiderresources.com Page 34
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 (e) On May 3, 2010, a total of 583,333 warrants were exercised for 583,333 common shares of Spider at $0.05 per share for gross proceeds of $29,167. (f) On May 3, 2010, a total of 416,666 warrants were exercised for 416,666 common shares of Spider at $0.05 per share for gross proceeds of $20,833. (g) On May 14, 2010, 912,299 agent options were exercised for 912,299 common shares of Spider at $0.06 per share for gross proceeds of $54,738 and 912,299 warrants with an exercise price of $0.10 and expiry date of December 24, 2011, were issued. (h) On May 14, 2010, 88,701 agent options were exercised for 88,701 common shares of Spider at $0.06 per share for gross proceeds of $5,322 and 88,701 warrants with an exercise price of $0.10 and expiry date of December 30, 2011, were issued. (i) On May 17, 2010, a total of 416,666 warrants were exercised for 416,666 common shares of Spider at $0.05 for gross proceeds of $20,833. (j) On May 21, 2010, 449,202 agent options were exercised for 449,202 common shares of Spider at $0.06 per share for gross proceeds of $26,952 and 449,202 warrants with an exercise price of $0.10 and expiry date of December 30, 2011, were issued. (k) On May 25, 2010, Spider and KWG entered into a binding letter agreement (“Letter Agreement”) which sets out the principal terms upon which it is proposed that the two corporations will complete a Merger, at the conclusion of which the shareholders of each corporation will hold 50% of the outstanding shares of the ongoing public corporation. The combined company will hold a current interest of 53% in the Big Daddy deposit, with the option to earn a further 7% to achieve a 60% interest in the project. It is anticipated that the ongoing public corporation will continue to be named “KWG Resources Inc.” for a period of time after the Merger and will continue to be listed on the TSX Venture Exchange (“TSXV”) and on the Canadian National Stock Exchange (the “CNSX”). Following the Merger, it is proposed that the name of the ongoing public company will be changed to “Spider-KWG Resources Inc.” subject to shareholder and regulatory approvals. It is anticipated that the Merger will be effected by way of a three cornered amalgamation under the Canada Business Corporations Act (the “CBCA”), pursuant to which Spider will amalgamate with a newly-incorporated, wholly-owned subsidiary of KWG, to become a wholly-owned subsidiary of KWG. Prior to the completion of the Merger, KWG will transfer its interest in the railway right of way, in its 1% net smelter returns royalty covering the Big Daddy Deposit, the Black Thor Deposit and the Black Label Deposit granted by Freewest Resources Canada Inc., and cash in an amount to be agreed upon between KWG and Spider to KWG’s wholly-owned subsidiary, Debuts Diamonds Inc. (“Debuts”), in exchange for Debut’s interest in various diamond exploration projects and a number of common shares of Debuts to be specified, and will distribute all of the outstanding common shares of Debuts to the shareholders of record of KWG. Under the terms of the Merger: (i) all of the common shares of Spider (the “Spider Shares”) outstanding will be exchanged for common shares of KWG (the “KWG Shares”) at the ratio of one (1) Spider Share for that number of KWG Shares equal to: www.spiderresources.com Page 35
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 (1) the number of outstanding KWG Shares, divided by (2) the number of outstanding Spider Shares, In each case calculated as at the close of business on the date immediately preceding the effective date of the Merger (the “Exchange Ratio”); (ii) each of the outstanding warrants to purchase one Spider Share (“Spider Warrant”) will, subject to regulatory approval, be exchanged for a warrant of KWG (“KWG Warrant”) exercisable to acquire that number of KWG Shares equal to the Exchange Ratio. All other terms of such KWG Warrant, including the exercise price and the expiry date thereof, shall be the same as the Spider Warrant; (iii) each of the outstanding options (whether or not vested) to acquire one Spider Share will, subject to regulatory approval, be exchanged for an option of KWG exercisable to acquire that number of KWG Shares equal to the Exchange Ratio at an exercise price per KWG Share and on other terms to be agreed upon and included in the definitive agreement in respect of the Merger (the “Definitive Agreement”); (iv) each of the outstanding compensation options of Spider (“Spider Unit Compensation Option”) to acquire a unit of Spider (“Spider Unit”), each Spider Unit consisting of one Spider Share and one common share purchase warrant of Spider, will, subject to regulatory approval, be exchanged for one compensation option of KWG (“KWG Unit Compensation Option”) exercisable to acquire a number of units of KWG equal to the Exchange Ratio (“KWG Unit”), each KWG Unit consisting of one KWG Share and one common share purchase warrant of KWG. All other terms of the KWG Unit Compensation Options, including the expiry dates thereof, shall be the same as the Spider Unit Compensation Options for which they are exchanged and all terms of the common share purchase warrants of KWG comprising part of the KWG Unit, including the exercise price and expiry date thereof, shall be the same as the common share purchase warrant of Spider comprising part of the Spider Unit; and (v) KWG shall continue with its listing on the TSXV and the CNSX. Completion of the Merger is subject to a number of conditions, including, but not limited to, confirmatory due diligence, the negotiation and execution of the Definitive Agreement, the receipt of all required regulatory approvals, including the approval of the TSXV, and approval of the shareholders of Spider. The Merger will be submitted to the shareholders of Spider for consideration and approval at a special meeting to be convened by Spider as soon as possible following the completion, to the satisfaction of Spider and KWG, as applicable, of their due diligence investigations and execution of definitive documentation. Each party will pay its own costs and expenses (including all legal, accounting and financial advisory fees and expenses) in connection with the Merger, including expenses related to the preparation, execution and delivery of the Letter Agreement, the Definitive Agreement and such other required documents. In addition, the parties have agreed that each party will pay the other a break fee of CDN$2.3 million if, among other things, the Merger is not completed as a result of such party completing an alternative transaction, including but not limited to a merger, amalgamation, share exchange, business combination, take-over bid, sale or other disposition of material assets, recapitalization, reorganization, liquidation, sale or issuance of a material number of treasury securities (except upon the due exercise of convertible www.spiderresources.com Page 36
    • Spider Resources Inc. Management’s Discussion & Analysis Dated – May 28, 2010 Three Months Ended March 31, 2010 securities outstanding on the date of this news release) or rights or interests therein or thereto or rights or options to acquire any material number of treasury securities or any type of similar transaction involving it or any of its subsidiaries other than with the other party to the Letter Agreement, the board of directors of such party withdraws or modifies, in a manner materially adverse to the other party to the Letter Agreement, its approval or recommendation of the Merger or otherwise fails to make such approval or recommendation, such party enters into a letter of intent or definitive written agreement with respect to a Superior Proposal (as defined in the Letter Agreement), or if such party is subject to a take-over bid initiated by a third party. This break fee will also be payable by Spider to KWG if KWG terminates the Letter Agreement following the failure by Spider to mail a proxy circular and related documents in respect of the Merger to its shareholder on or before June 21, 2010. The parties have further agreed that, in certain other circumstances, Spider will pay a break fee to KWG of CDN$1.1 million or, KWG will pay a break fee to Spider of CDN$1.4 million. Proposed Take-Over Bids for KWG and/or Spider by Cliffs Natural Resources Inc. On May 24, 2010, Cliffs Natural Resources Inc. (“Cliffs”) announced that it intends to make take-over bids for all of the issued and outstanding common shares (not already owned by Cliffs or its affiliates) of KWG and/or Spider for cash consideration of $0.13 per share. Cliffs advised that neither bid would be conditional upon the completion of the other. The board of directors of each of Spider and KWG has formed an independent special committee to consider the bid by Cliffs. (l) On May 26, 2010, a total of 3,500,000 warrants were exercised for 3,500,000 common shares of Spider at $0.10 for gross proceeds of $350,000. On the same date, 2,500,000 agent options were exercised for 2,500,000 common shares of Spider at $0.03 per share for gross proceeds of $75,000 and 1,250,000 warrants with an exercise price of $0.05 and expiry date of August 7, 2010, were issued and exercised for gross proceeds of $62,500. www.spiderresources.com Page 37