West African Iron Ore Corp (TSXV: WAI) - Initiating

Investment Analysis for Intelligent Investors

Siddharth Rajeev, B.Tech, MBA, CFA Analyst

Chris Porter, BSc

Research Associate - Mining

February 17, 2012

2012 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

West African Iron Ore Corp (TSXV: WAI) - Initiating Coverage: Strategically located and highly

prospective Iron Ore property in Guinea, West Africa

Sector/Industry: Junior Exploration/Mining www.westafricanironore.com

Market Data (as of February 16, 2012)

Current Price C$0.12

Fair Value C$0.46

Rating* BUY

Risk* 5 (Highly Spec)

52 Week Range N/A

Shares O/S 175.01 mm

Market Cap C$21.00 mm

Current Yield N/A

P/E (forward) N/A

P/B 1.1x

YoY Return N/A

YoY TSXV -31.3% *see back of report for rating and risk definitions

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Investment Highlights

• West African Iron Ore Corp. holds two iron ore permits in the Republic of Guinea, West Africa: Forécariah and Kérouané.

• An exploration target was calculated for the Sambalama, and Kalyadi targets (both on Forécariah), of between 2.9, and 5.1 billion tones, with average grades of 25% - 35% Fe.

• Drilling commenced in April 2011, with aims to define an initial 43-101 resource estimate by the end of Q4 2012 on Forécariah.

• WAI recently discovered two highly prospective new targets in the northern area of the Forécariah permit.

• Rio Tinto (NYSE: RIO) and Bellzone (LSE: BZM) both have advanced stage iron ore projects in the country that include construction of the trans-Guinean railway and a deep sea port. WAI is strategically located to potentially take advantage of this infrastructure in the future.

• The company is actively seeking investors and strategic partners in China.

• We believe that WAI represents an attractive takeover target once the project is more advanced. The company has a strong board of directors with extensive experience in mergers and acquisitions.

Risks

• Success of drilling, resource expansion, and development are important long-term success factors for the company.

• The company does not have a NI 43-101 compliant resource estimate.

• The value of the company depends on commodity prices.

• Political risk could have an effect on project development and investor interest.

• Current infrastructure is insufficient to support a bulk tonnage iron ore mining operation.

Key Financial Data (FYE - Dec 31)

(C $)

2011 (12 mo ended

Sept 2011)

Cash + ST Inv. 8,924,157

Working Capital 7,401,073

Mineral Properties 14,029,889

Total Assets 24,527,384

Net Income (7,498,102)

EPS (0.05)

West African Iron Ore Corp. is a Vancouver based iron ore exploration company with assets in the Republic of Guinea, West Africa.

The 1,400km2 Forécariah permit has two main highly prospective deposits with an exploration target of between 2.9 and 5.1 billion

tonnes, at an average grade of 25% - 35% Fe. The property is strategically located to take advantage of large near term

infrastructure investment from advance stage mining projects in Guinea.

An FRC

analyst visited

the Forécariah

project in

January 2012.

West African Iron Ore Corp. (TSXV: WAI) - Initiating Coverage Page 2



Company

Overview

Corporate

History/

Structure

West African Iron Ore Corp. (“WAI” or “the company”) is a mining exploration company based in Vancouver, Canada, listed on the TSX Venture under the symbol WAI. The company holds two large iron ore permits in the Republic of Guinea, West Africa, named Forécariah and Kérouané. Exploration is at an early stage and is focused on two highly prospective deposits towards the eastern edge of the Forécariah permit, known as the Kalyadi and Sambalama targets.

The company intends to define an initial NI 43-101 resource estimate by the end of

2012.

Although existing infrastructure to support a bulk tonnage mining operation in Guinea is insufficient, there is near term potential to develop a rail line and deep water port through investment from advance stage mining projects in the country. WAI is strategically located

to take advantage of these developments. WAI's current Guinean assets were initially held by a private company named Sky Alliance Resources Guinee SA (“SAR Guinee”), which was a wholly owned subsidiary of Sky Alliance Resources Inc. (“SARI”). These assets were then transferred to a Vancouver based shell, Westward Explorations Ltd., in March 2011. Westward then changed its name to West African Iron Ore Corp. Management of SARI took over the management of WAI. SARI’s CEO, Guy Duport, became WAI's CEO. Joe Bangoura, founder of SARI, is on the Board of Directors of WAI. Westward paid US$1 million in cash and issued 24.5 million common shares to SARI. In addition, WAI agreed to settle loans lent by the directors of SARI to SAR Guinee to the amount of US$2.87 million, for total consideration of US$3.87 million and 24.5 million

common shares. Additional cash and share payments will be payable to SARI on completion of resource milestones, providing they are fulfilled on, or prior to the sixth anniversary of the closing date. The resource milestones are as follows:

• An additional U$1 million and 16 million common shares upon defining a mineral resource greater than 750 million tonnes of iron ore.

• An additional U$1.5 million and a further 40 million common shares upon defining a mineral resource of greater than 2 billion tonnes of iron ore.

• An additional 50 million common shares and a grant of 1% royalty to SARI upon defining a mineral resource greater than 3 billion tonnes of iron ore. The royalty can be purchased by the company for U$300 million at any time within one year of the start of commercial production.

• An additional 10 million common shares upon definition of each additional 500 million tonnes of iron ore up to a maximum 120 million additional common shares.

All mineral resources should be defined in accordance with NI 43-101 and have a minimum of 20% in the indicated category. The resource must also have a magnetite concentration of at least 63% iron.




Forécariah

Project

Guy Duport and Joe Bangoura own 46.6% each of SARI’s shares. We believe this is

positive, as management’s interests (to meet the above mentioned resource milestones)

are aligned with investors.

Property Overview

The Forécariah project is the company’s key property, located approximately 90 kilometers east-southeast from the capital city of Conarky (Figure 1 below).

Figure 1. Location of the Forécariah permit area

Source: SRK technical report, March 2011




The property comprises three contiguous permits covering an area of around 1,400km2, originally staked by SAR Guinee in October 2008. All necessary permits are in place allowing the company to carry out exploration. Early work included airborne magnetic surveys and grab sample collection, which identified iron mineralization over two main north-northwest orientated zones. Ten key targets have been identified with a total strike length of over 30km, and an estimated surface area of 30.8km2. Iron mineralization is hosted in magnetite quartzite and subordinate magnetite schist within the Kissi Kissi Formation.

Drilling began in April 2011, and has focused on two highly prospective deposits

towards the eastern edge of the permit, known as the Kalyadi and Sambalama.

Property History

After Guinea achieved independence in 1958, the Russian Office Soviétique de Récherches Géologiques (“OSRG”) carried out mapping and identified iron bearing quartzites in the region. In the 1970’s, they outlined a non 43-101 compliant historical resource for the

Forécariah permit area of 750 million tonnes. In 1978-1979, the Guinean government contracted a surveying company to complete a country wide airborne geophysical survey. On acquiring the permit in 2008, SAR Guniee contracted AMTEC Resources Management Limited (AMTEC) to interpret the data covering the Forécariah property. Based on this information, a north-northwest orientated magnetic anomaly was identified with a combined strike length of up to 30 km. Research on the geology and geochemistry of the quartzites was also conducted by Millimono Tamba Soye at around the same time. His work summarized that four iron bearing quartzite horizons exists between layers of schist, gneiss and amphibolite with thicknesses between 30m and 400m, and strike lengths between 3,000m and 11,00m. Additional work on the property was completed by an un-named Turkish company in 2003, and by another company in 2005. WAI does not have any information on exploration carried out by these companies.

Mining in Guinea

Guinea is a former French colony, gaining independence in 1958. Since that time, the country has been governed by a number of autocratic rulers until November 2010, when Alpha Condé was voted as the first democratically elected president. In July 2011, a failed attempt was made to assassinate Condé.

Guinea is a key player in the world bauxite industry and is the country’s largest export. According to the US Geological Survey, Guinea was the fifth largest producer of bauxite in 2011, producing about 18 million dry tons, and potentially hosts the world’s largest reserves, totaling 7.4 billion tons. Gold and diamond mining is also active in the country. We




believe the ability for Guinea to attract large Bauxite projects shows the country is able

to support large scale mining operations. The Fraser Institute is a Canadian based independent research organization that completes an annual survey of mining jurisdictions around the world. Guinea was included for the first time in the 2010/2011 report, and was ranked 51 out of 79 overall. This ranking is based on a number of factors such as security, mineral potential, infrastructure, government policy and taxation regime. Guinea scored best (2/79) in the ‘uncertainty regarding which areas are to be protected as

wilderness areas, parks or archaeological sites’. The country scored badly in areas such as ‘political stability’ (70/79), ‘geological database’ (77/79), and ‘Labor

regulation/employment agreements and labor militancy/work disruptions’ (62/79).

These low scores reflect the country’s lack of infrastructure and education as a result of

political instability in recent history.

Given that the country has only recently transitioned to a democratic government, we

remain optimistically cautious of the political situation and the effect this will have on

developing a mining project. In our discussions, WAI management is confident about the future of Guinea’s political situation, and foresees gradual political stabilization. Although WAI employs many locals for labor jobs, the lack of formal higher education means that the company sources the majority of its skilled work force from outside Guinea.

Management has indicated that they rely heavily on overseas skilled employees and we

consider the ability of the company to attract skilled individuals a minor risk.

However, this is common for mining projects in developing countries, and we note that there is an established bauxite mining industry in the country. Our research shows that West Africa has been identified as an area that potentially hosts one of the world’s largest iron ore deposits. There are several early stage iron ore projects in

Guinea that have the potential to greatly improve the mining infrastructure in the next

few years, which could significantly benefit development of the Forécariah project. Infrastructure is discussed in more detail below. 2012 Mining Code Prior to his election, Condé pledged to reform the country’s mining sector and a new mining code was released in late 2011. The salient points from the new mining code that will affect WAI in the short to medium term are presented in the box on the following page.




Source: WAI Management after Guinea Mining code, September 2011

The new code also includes obligations of the mining company to retain minimum levels of employment from locals and local suppliers. It also requires the company to comply with new anti-corruption legislation and transparency rules.

Being an early stage exploration company, much of the code does not directly affect

WAI at this time, but will become more critical as the project is developed.

Location and Climate

The Forécariah project is located approximately 90km east-southeast from the capital city of Conarky. National road 4 runs directly through the property to the town of Forécariah. WAI has offices in both Forécariah and Conarky. The climate at the property is tropical and humid with two primary seasons. The dry season runs from November to April, and the rainy season from May to October, with the wettest months generally from July to September. Average temperatures range from 28oC to 30oC with greater than 90% humidity for most of the year. Topography of the site is characterized by flat land on the coastal areas with high hills on the north-eastern corner of the property, to elevations of 1,100m. Several rivers flow through the property into the Atlantic Ocean. The low lying coastal areas are covered in mangrove swamps and wetlands.

• The exploration licenses are granted for an initial 3 year period, and can be

renewed twice for 2 years each time. At each renewal, the license holder must relinquish 50% of the license perimeter.

• Once the holder of an exploration license has discovered an economic deposit,

proved through a feasibility study, he can apply either for:

- An Industrial Exploitation License if the total investment is below US$1

billion. The Industrial exploitation license is granted for 15 years and

can be renewed by 5 year terms indefinitely;

- Mining Concession if the total investment exceeds US$1 billion. The

Mining Concession is granted for 25 years and can be renewed by 10

year terms.

• During the exploration phase, and the development phase of the mine, the

license holders are exempt from most taxes, including income tax, VAT and the

largest part of import duties.

• The state is entitled to receive, free of charge, 15% of the equity of any iron ore project. In addition, the state is entitled to buy 20% additional equity on terms to

be agreed with the license holder.




Access and Infrastructure

The regional town of Forécariah, where the company has a regional office, is accessible by a sealed road from Conarky. Numerous unsealed gravel roads and bush tracks cross the tenement, some of which are only useable in the dry season. Guinea ranked 72 out of 79 in the “infrastructure” category in the most recent Fraser Institute survey. However, based on our research, and observations in Guinea, we believe this score does not reflect the company’s position. As can be seen in Figure 1 & 2, we believe that WAI’s Forécariah project is close enough to the coast that ore could be hauled by road for export, which is a key differentiator for the company. Although there is no suitable port at this time, the proposed deep water port at Matakang is of primary interest to WAI. Given that infrastructure costs (related to transportation)

typically add hundreds of millions of dollars to the CAPEX of an iron ore project, the

proximity to a proposed deep sea port is a significant upside for WAI, and offers a

large advantage over other projects in Guinea.

Figure 2. Planned port and rail infrastructure in Guinea


Note: Red area indicates WAI’s Forécariah permit area




The SRK Consulting technical report states that power for the operations will likely be produced by heavy oil generators on site. Guinea is considered to have a high potential for hydro power, and already has operating facilities, such as the Garafiri project on the Konkoure River, which supplies power to the Conarky region. Management has stated that they are currently in talks with Chinese companies to provide assistance to the Guinean Government to construct hydro power schemes in the country. Water for operations will likely be sourced form the Konkoure River, some 100km from the Sambalama deposit.

There are two advanced stage iron ore projects in Guinea that may positively impact

the proposed WAI operation. The location of these projects, and the proposed Trans-Guinean Railway line, are shown in Figure 2 above. Rio Tinto’s Simandou project includes plans to construct up to 700km of rail line to transport iron ore to a proposed deep water port at Matakang. Matakang is approximately 40km from WAI’s Sambalama deposit, and currently has a small fishing port. Rio’s operation will have a planned processing capacity of 95 million tonnes of ore per year. Rio's website states that they have spent or committed US$3 billion to the Simandou project to date, which includes US$1 billion on infrastructure. In April 2011, Rio entered into a ‘Settlement Agreement’ with the Guinean government regarding project development. Part of the agreement states that the operator of the rail line “….may haul other mineral producers' ore subject to commercial agreement”. In addition, Bellzone’s (LSE: BZM) Forécariah project (not to be confused with WAI's

Forécariah) is located east of the WAI permit area, and plans to truck crushed ore from the mine to a barge port on the coast in Konta, which is located within the current boundaries of WAI’s Forécariah permit. From there, ore will be transported to a deep water platform and trans-shipped to a large transport vessel for export.

Rio plans to complete the first shipment of ore in mid-2015, whilst BZM hopes for

initial production from their Forécariah project in March 2012. These projects are generally more advanced than WAI, which puts the company in a good position to take advantage of any future developments.

Management has indicated that the proposed deep water port at Matakang is of primary interest to WAI. Given the proximity of the deposit to the proposed deep water port,

management states that ore concentrate would likely be transported to the port using

road haulage or even a conveyor belt. Although the lack of developed and reliable infrastructure in Guinea is currently a concern, we believe that this has the potential to improve in the next few years with increased investment from mining companies and government. Overall, we believe that WAI is well

positioned in Guinea, and is not subject to the same level of infrastructure risk as other

mining projects in the country, located distal from the coast.




Geology and Mineralization

The rocks that host iron mineralization in the permit area are magnetite-hematite quartzites with subordinate magnetite schist within the Kissi Kissi Formation, of the Archean Forécariah Group. It is thought that the magnetite was formed during high grade- metamorphism of a ferruginous quartzite or a BIF (banded iron formation). This model assumes that iron mineralization is therefore stratabound, and stratiform (restricted to stratigraphical layers), that has been subject to structural alteration as a results of folding and faulting. There are many shallow and surface outcrops of magnetite quartzite that are known to be coincident with high magnetic anomalies identified through airborne surveys. The main anomalies are located between Bambaya, and Heriko, forming up to five semi-continuous belts of mineralization. Based on initial exploration, which includes magnetic surveys, mapping and surface sampling, the magnetite zones are thought to have strike lengths of up to 16 km, with true thicknesses of over 100m. Mineralization comprises poorly exposed schist, amphibolite and minor biotite-hypersthene, amphibole and biotite gneisses. Mineralization is restricted to two primary zones; the main zone (Sambalama-Kalyadi) is centered on the Sambalama deposit in the south-west of the tenement, which is the current main focus of exploration (Figure 3). The second zone (Bouboua-Modia-Yawoli) is located towards the northeast of the permit area, some 15 km northeast of Forécariah. There has been no drilling on this zone to date.




Figure 3. Interpretation of iron occurrences in the permit area.





Exploration Target

There has not been sufficient drilling at either the Sambalama, or Kalyadi targets, at this time, for us to calculate an in-house resource estimate.

The SRK technical report for the property released in March 2011, included an estimate of the potential exploration target. No drilling was done on either deposit at that time. This was based on surface outcrop mapping and magnetic survey data, which was found to have good correlation. This allowed an approximate mineralized area to be calculated for targets on the Sambalama and Kalyadi deposits. The thickness of the deposit was based on a number of assumptions and grade was derived from 186 surface grab samples. Using an implied area of 7.3km2

, and a 200m vertical depth of mineralization, the total

exploration target was calculated to be between 2.9 and 5.1 billion tonnes with average

grades of 25% - 35% Fe.

Table 2. Estimated exploration target


Based on our observations, and the information made available to us by management,

we believe this estimate is realistic. It should be noted that this estimate assumed mineralization to a depth of 200m, and drilling to date has identified mineralization to depths of around 130m. A grade of between 25% and 35% Fe is relatively low when compared to Rio’s Simandou resource of 2.25 billion tonnes of hematite, with a grade of around 66% Fe. As stated above, the Simandou project requires up to 700km of railway, the cost of which is unknown at this time, but will likely be several billion dollars. In addition, more than US$1 billion is being spent on development of over 600km of railway from the Zogota project in eastern Guinea, a joint venture between Vale (NYSE: VALE) and private company BSG Resources Ltd. The proximity of WAI’s Sambalama project to the proposed deep water port (40km) may drastically reduce transportation costs, which is likely to offset the lower grade of the deposit (extraction/processing costs).

Furthermore, management has indicated that they expect the strip ratio to be “virtually zero”, which, if accurate, might further offset the lower grade of the deposit. In addition, management believes the processing technique required to upgrade the ore is relatively inexpensive and simplistic, which would also mitigate operating costs.




Exploration

As stated above, a combination of helicopter-borne magnetic surveys and ground observations have led to the identification of two main north-northwest oriented zones of iron mineralization, which correspond to magnetic survey anomalies. 186 surface samples

collected across the entire Forécariah permit gave an average grade of 36% Fe. The Kalyadi and Sambalama deposits are the main targets in the south-western trend, and the only areas drill tested on the property to date. A total of 44 holes have been drilled on these deposits, including 19 DD (diamond drill) holes and 25 RC (reverse circulation) holes. An

average Fe grade of 39% was obtained from 78 surface samples collected on the

Kalyadi and Sambalama targets. Kalyadi target WAI began drilling the Kalyadi target in April 2011, with aims to gather information on the geological structure of the deposit. 9 DD holes (1,900m) have been drilled that defined magnetite bearing gneisses and bands of amphibolite up to 15 meters thick, and to depths of up to 150m. Sambalama target Airborne surveys have identified a magnetic target on the Sambalama deposit in excess of 100m wide and up to 5km in strike length. In addition, there are numerous outcrops of magnetite mineralization at surface. As of the date of our site visit on January 21, 2012, a total of 25 RC holes and 10 DD holes had been completed at the Sambalama deposit. The most significant hole to date is SAM010 which intersected 27.6m starting at 94m depth with an average grade of 51.28% Fe. The following table is a summary of drilling highlights at the Sambalama deposit.

Table 1. Sambalama deposit drilling highlights

Hole ID From (m) To (m) Width (m) Fe total (%)

SAM 002 2.3 13.8 11.5 63.18

SAM 003 0.0 14.2 14.2 70.53

SAM 004 33.6 41.0 7.4 41.54

SAM 010 94.0 121.6 27.6 51.28

SAMRC 001 0.0 8.0 8.0 68.95

SAMRC 007 0.0 8.0 8.0 44.21

SAMRC 008 0.0 7.0 7.0 59.2

SAMRC 008 0.0 23.0 23.0 28.26

SAMRC 012 0.0 8.0 8.0 57.3

SAMRC 012 0.0 38.0 38.0 25.4

SAMRC 013 0.0 12.0 12.0 56.83

SAMRC 013 0.0 42.0 42.0 26.16 Source: Company




We believe the results of the drilling carried out to date are encouraging, especially as

mineralization appears to start at surface to depths around 130m, with average Fe

grades ranging from 24.35% to 70.53%. Mineralization remains open to the east and west. The geological structure of the Sambalama deposit appears to be relatively complex and WAI continues drilling in order to gain a better understanding. The current working deposit model is either separate metamorphosed BIF units, or a tightly folded or thrust-duplicated larger BIF unit. Management are encouraged by the presence of the upper 8-12m encountered in three of the RC holes (SAMRC 012, 013 and 018), which encountered material that may be amenable to direct shipping ore (DSO), which requires minimal processing. The potential to identify a large DSO deposit represents significant upside for WAI as it would reduce capital expenditure and operating costs.

Metallurgical testing has shown that up to 63.2% recovery is achievable with ore from

the Sambalama deposit to produce a material with at least 64% Fe.




Figure 4. Sambalama deposit drill hole locations

Source: Company

Future Development

Exploration Diamond drilling at Sambalama experienced poor recovery of the near surface iron-enriched




cap due to the material being highly friable. For this reason, WAI suspended diamond drilling in October 2011. At the time of our site visit in January 2012, there were two RC drill rigs operating at Sambalama, which generally achieved better recovery rates. Management indicated that they expect to begin diamond drilling at Sambalama in February 2012. WAI plans to drill 30,000m within the Forécariah permit in 2012, 5,000m of which will be DD holes located on the Sambalama and Kalyadi targets. Fugro Ground Geophysics PTY (“Fugro”) is currently completing ground gravity surveys across the Sambalama deposit that will assist WAI in identifying additional drill targets. Resource Estimate WAI originally planned to produce an initial NI 43-101 resource estimate by the end of Q3 2011. Management has stated that the revised completion date is now the end of Q4

2012.

Being a grass roots project, we believe that this delay of some 14 months is not a large concern. Delays such as this are not uncommon at this stage in development of an exploration project, and management have cited several reasons including: unusually high rainfall during the wet season; poor recovery rates in some of the DD holes; complex geological structure; and delays in obtaining assay results from the lab.

Additional Targets In January 2012, geological mapping in the northern area of the permit led to the discovery of two highly prospective targets known as Wondima and Kantinbanga (see Figure 5, below) The new targets comprise several generally flat lying plateau zones with an area of over 50km2. The iron bearing horizons are predominately composed of hematite oolites and pisolites with magnetite gravels. At least three layers of a hardened iron cap has been observed at a river cut near the edge of the second plateau comprising hardened accumulations of silica, alumina and iron oxide. Photographs of these new targets, and the river cut, taken by us can be seen in the ‘site visit’ section below. WAI has planned additional exploration work based on positive results from grab samples analysed using a Nitron XRF analyser. Initial work will include mapping and pit sampling in order to gain a better understanding of the near surface lithology, followed by identification of potential drill targets. Once Fugro has completed their current work program, it is intended that they complete gravity surveys on Wondima. Management has

indicated that drilling will begin in 2012, if the results from initial exploration are

positive.

We had the opportunity to accompany WAI staff to these newly discovered targets

during our site visit, and although no exploration work was completed at that time, was

encouraged by the observations. It is possible that the company could expedite exploration




on these targets to define the first NI 43-101 resource estimate for the property, especially if the geological structure is less complex than that found at Sambalama.

Figure 5. Location of newly identified Wondima and Kantinbanga targets

Source: Company

Development Timeline

In our discussions, management states that the strategy is to develop the project to prefeasibility stage by H2 2013, followed by a construction decision by the end of 2013, or




Conclusion

the beginning of 2014. We would caution the reader that the permitting and licenses required to bring the project to production may delay this schedule. However, management has indicated that they do not expect significant delays as the government is eager to develop mining projects in the country. This is demonstrated by the recent developments with Rio Tinto and Bellzone. Exploration difficulties may also extend this time frame. Given that the project is early stage, and does not have a NI 43-101 compliant resource, we cannot speculate on this development schedule. However, we do believe that WAI represents an attractive takeover target once the project is more advanced, for the following reasons:

• Highly prospective property with potential to define a large iron ore resource.

• Some drill holes have encountered material that may be amenable to direct shipping ore (DSO), which may reduce capital costs.

• Low stripping ratio, reducing operating costs.

• Strategic location close to the capital city Conarky and the proposed deep water port.

• Planned infrastructure developments in the country may significantly reduce capital expenditures once a decision is made to develop the project.

• Guinea is well located to attract interest from China and India, both of which have high demand for iron ore.

• Potential buyers (e.g. Rio Tinto) already have a presence in the country. WAI has recently appointed Canaccord Genuity Corp. to actively identify strategic partners in China. If successful, the company might be well financed to develop the project quickly.

We believe that WAI is in a good position to develop a significant iron ore deposit at Forécariah. The strategic location of the property means that WAI has a significant

advantage over other iron ore projects in the country. There is high potential to

capitalize on near term infrastructure improvements in Guinea. The existing presence of large scale bauxite projects and highly prospective geology has attracted investment from major players in the mining sector. Although the ore grade is relatively low compared to many peer deposits (25% and 35% Fe), exploration to date has indicated a very low strip ratio which might reduce operating costs. In addition, management has indicated that the processing technique required to upgrade the ore is relatively inexpensive, and simplistic, which would also mitigate operating costs. Proximity to the proposed deep water port has the potential to create further upside for WAI by further reducing costs. We believe that that there is high potential for political stabilization and improved mining policy in Guinea over the next few years, which may increase investor interest in the country. Although production of an initial NI 43-101 resource estimate has been delayed, we are




Kérouané

Property

encouraged by the drilling so far, and anticipate additional results in 2012. We believe WAI

has high potential to define a large iron ore resource at the highly prospective

Forécariah permit.

Property Overview

The Kérouané property is an early stage iron ore exploration project located in south eastern Guinea, approximately 400km from the Forécariah project. The permit covers an area of some 500km2, and is approximately 50km from Rio’s Simandou project. SRK Consulting produced a NI 43-101 technical report on the property in November 2011. The route of the proposed trans-Guinean railway from Simandou passes the south western side of this permit, which offers additional upside.

Figure 6. Location of the Kérouané permit

Source: Source: SRK technical report, November 2011.

Exploration

Exploration on this permit to date has comprised over 3,000 line km of high resolution helicopter borne magnetic survey in May 2011, and a small amount of mapping and sampling. This led to the identification of a magnetic zone up to 9km long, and up to 2km wide, known as the Soromaya belt, which coincides with BIF surface outcrops. Field mapping completed by SRK has identified a metamorphosed BIF up to several kilometers in length and 200m width, as well as secondary mineralized units. Surface samples analyzed to date give an average grade of 39.6% Fe.




Site Visit

Future Development

The SRK report included recommendations for a future two phase exploration program. Phase I will include surface mapping, surveying, trenching and pitting to collect samples for analysis, as well as around 2,000m of test drilling with a Winkie rig to define high priority drill targets. Three such targets have already been identified by previous work, known as Soromaya, Yiraya and Koledou. Phase II drilling will commence in Q4 2012, with an estimated budget of approximately US$ 3 million.

On January 21, and 22, 2012, we had the opportunity to visit the Forécariah property. We observed the ongoing drill program at the Sambalama target, as well as WAI’s offices in both Forécariah and Conarky. In addition, a visit was made to the newly identified Wondima and Kantinbanga targets towards the northern end of the permit area. Photographs taken by us on the site visit are provided below.

Figure 7. Nitron XRF analyzer at the WAI offices in Forécariah

Source: Fundamental Research




Figure 8. Sample table: drilling at the Sambalama target


Figure 9 & 10. RC rig at Sambalama drilling hole SAMRC060 (left), and magnetite core from DD

hole SAM010, which intersected 27.6m of 51.28% Fe (right).





Figure 11. Newly constructed workers camp close to the Sambalama deposit. WAI aims to reduce

travel times/costs and increase efficiency


Figure 12. WAI geologists on the flat lying plateau of the newly identified Wondima and

Kantinbanga targets





Management

Figure 13. One of three river cuts exposing the hardened iron cap near the edge of the

second plateau.


Management and the board hold approximately 16% of the outstanding shares. Biographies of the company’s management team and board of directors, as provided by the company, are below: Guy Duport, Chief Executive Officer & Director - Mr. Duport has served as the President and CEO of SARI since 2007, and since August 2005 he has also been the CEO of Trendfield Holdings Ltd. (“Trendfield”), a British Virgin Islands company with offices in Hong Kong and Beijing and mining operations in West Africa and Mongolia. At Trendfield, Mr. Duport has developed the company into a growing mining and consulting company. From 1987 to 2006, he worked as a senior financial management consultant dealing with financial due diligence, mergers and acquisitions and contested take-over bids in Europe, the United States and Africa. Mr. Duport has held several senior management positions within the ISSA Group of companies and established the ISSA Group’s Beijing office in 2000. He is also a director and board member of various mining and petroleum companies, including Southern Petroleum Ltd., and was a director of GoviEx Uranium Inc. from July 2008 until March 12, 2011. Mr. Duport has an MA (Hons) with a specialization in European Commercial Law with English, and is a Professional Member of the Society for Mining, Metallurgy and Exploration (SME) in Colorado. Paul Matysek, Non-Executive Chairman and Director - Mr. Matysek specializes in developing resource-based companies from conception to production. He has over 35 years




of experience in exploration and development, and held several senior management and/or directorship positions with First Quantum Minerals Ltd., First Majestic Silver Corp. and Energy Metals Corp. Mr. Matysek currently holds a number of directorships including with Lithium One Inc. (Founder), Nevada Copper Corp., Forsys Metals Corp. and Wealth Minerals Ltd. Until recently, Mr. Matysek was the President and Chief Executive Officer of Potash One Inc., a leading junior potash developer in Canada. Over the past three years, Mr. Matysek has led Potash One’s Legacy Project in Saskatchewan from concept to feasibility. In January 2011, Potash One was purchased for $450 million dollars. Prior to Potash One, Mr. Matysek was the CEO and President of Energy Metals Corporation, a uranium company whose shares traded on the New York Stock Exchange and the Toronto Stock Exchange. Energy Metals grew from a market capitalization of $10 million in 2004 to $1.8 billion when it was sold to a larger uranium producer in 2007. Jonathan Challis, Director - Mr. Challis is a mining engineer with over 30 years experience in the operation, management, financing and analysis of mining projects around the world. Mr. Challis has an honors degree in Mineral Exploitation and an MBA. Mr. Challis started his professional life as a Mining Engineer with Gold Fields of South Africa Limited in 1974 before returning to Europe where he worked as a mining analyst and project financier for several European Institutions. He subsequently joined McLeod Young Weir in London in 1987 as a mining analyst prior to relocating to Toronto in 1990. In 1994, he joined CM Oliver in Toronto as a Director and Senior Mining Analyst, prior to moving back to London where he was instrumental in establishing a European presence for that company. In 1997, he joined Ivanhoe Capital Corporation and was involved in numerous early stage exploration ventures in diverse locations. He has subsequently been involved in several Canadian Resource Companies in the roles of CEO, President and Director. Mr. Challis is currently a Director and CEO of SEAM Ltd, a private UK based mineral exploration company active in Eastern Africa. Mr. Challis is also a Director of Rye Patch Gold Corp (TSX-V:RPM). Craig Angus, Director - Mr. Angus is a graduate of The University of British Columbia’s Sauder School of Business and is a veteran of over thirty years in the Canadian and International mining industries. Mr. Angus was the Founder, President, CEO and subsequently Chairman of Nevsun Resources Ltd., a Canadian based, African focused gold producer. In addition, he founded Sunridge Gold Corp., for which he is the current Chairman, and also founded Potash North Resource Corp. He has extensive experience on the African continent and has raised hundreds of millions for the exploration, development and construction of mining projects around the globe. Harald Ludwig, Director - Mr. Ludwig is currently Co-Chairman of the Board of Lions Gate Entertainment Corp. Since 1985 Mr. Ludwig has served as President of Macluan Capital Corporation, a private equity and investment firm. Mr. Ludwig is a director of West Fraser Timber Company Ltd., a public company listed on the Toronto Stock Exchange and one of North America’s largest forest products companies. He is also a director of Canadian Overseas Petroleum Limited a TSX Venture Exchange company, and the Chairman and a director of Prima Columbia Hardwood Inc. which is a TSX Venture Exchange company. He also serves as an adviser to Tennenbaum Capital Partners, LLC, a private investment firm.




Management

Rating

Mathieu Charette, Chief Financial Officer & Secretary - Mr. Charette was the Controller of GoviEx Uranium Inc. from April 2008 to May 2011. In this capacity, he was acting as CFO, and has been managing the Finance team of GoviEx Uranium for the past two years. He was involved in the management of the Niger subsidiaries and has considerable experience in West Africa. Previously, he was the Controller of Quebecor World Vancouver from July 2007 to March 2008 and prior to that, he held various other positions at Quebecor World Inc. Mr. Charette holds a Bachelor of Business Administration with a specialization in accounting and a Graduate Diploma in Taxation from HEC Montreal. He is also a Certified Management Accountant (C.M.A.). Mohamed Joe Bangoura – Director - Mr. Bangoura’s idea of replicating his mining success in Niger was the brainchild that drove him to co-found Sky Alliance RessourcesGuinée SA, West African Iron Ore Corp. fully owned subsidiary. Since its inception in 2007, Mr. Bangoura, a Guinea national, has served as the Administrator General of Sky Alliance Resources Guinée SA. He is also a founding member of Trendfield Holdings Ltd. (“Trendfield”), a British Virgin Islands company with mining operations in West Africa and Mongolia. From 2004 to 2006, he was Vice Director at REDSTONE Gold Ltd., a Xian, China based mining company, where he managed gold, uranium and oil mining projects. From 2002 – 2004 he served as West African Countries advisor to China National Petroleum Corporation (“CNPC”), a state-owned fuel-producing corporation and the largest integrated oil and gas company in the People’s Republic of China, with headquarter in Beijing. In 1998 he founded MATA Trading International, a Shanghai, China based consulting company that focused on opening new energy and resources opportunities between China, Angola and Guinea, offering advice to Chinese companies looking to enter the African market. Mr. Bangoura has more than 12 years of China and Africa business expertise. He has a Bachelor degree in International Relations from Fuda University in Shanghai, and is fluent in French, English, Mandarin, Soussou, Mandingo, and many other West African local languages. We believe that one of the most important aspects of a junior mining company is its management. Therefore, we have developed a management rating system as a quantitative way to rate management based on a number of factors, including technical experience, the ability to raise financing, and the management’s time commitment to the company. Our net

rating for West African Iron Ore Corp. (see below) is 4.2 out of 5.0.




Strength of

Board

4.21

4.00

4.00

4.80

4.50

3.75

0% 20% 40% 60% 80% 100%

Net Rating

Team's focus on the company

Experience in projects similar to the current project

Track record in raising capital/working for public

companies

Experience in putting mines to production/generating

prospects

Technical Experience

We believe certain members of the management team and Board of Directors

(including Joe Bangoura) are well connected with the Guinean government, which will

assist in areas where other mining companies may encounter difficulties during project

development. In addition, CEO Guy Duport has been a resident in Beijing for a number of years which may be useful when attracting Chinese investors. It should be noted that this information was learned during our visit to the property, and discussions with management, and has not been verified. We believe that the Board of Directors of a company should include independent or unrelated directors who are free of any relationships or business that could materially interfere with the director’s ability to act in the best interest of the company. An unrelated/independent director can be a shareholder.

Poor Average Good

None of the directors have filed for personal bankruptcy X

Two out of six hold shares in the company X

The Audit committee is composed of three board members,

all of which are independentX

The Compensation committee is composed of three

independent board membersX

XFive out of six directors are independent




Financials

Valuation &

Rating

At the end of September 2011, the company had $8.92 million in cash and short-term investments. Working capital was $7.40 million. We estimate the company had a burn rate (spending on operating and investing activities) of $0.62 million per month in the 12 month ended September 2011. The following table shows the company’s cash and liquidity position at the end of September 2011.

(in C$)

2011 (12 mo ended

Sept 2011)

Cash 8,924,157

Working Capital 7,401,073

Current Ratio 4.89

LT Debts/Assets -

Burn Rate Per Month (619,973)

Cash from financing activities 10,289,287 The current cash + short-term investment position is $6 million (according to management).

Management has a CAPEX budget for 2012 of $6 - $7 million - implying the company

will have to raise additional capital by the end of this year.

Stock options and warrants: We estimate the company currently has 15.51 million stock options (weighted average exercise price of $0.34) and 45.00 million warrants (weighted average exercise price of $0.57) outstanding. None of them are "in the money".

Iron prices increased from $60 per metric ton in 2007 to $120 per metric ton in 2011 (as shown in the chart below).

Iron ($ per metric ton)

$-

$20

$40

$60

$80

$100

$120

$140

2007 2008 2009 2010 2011

Iron ore is the source of primary iron for the world's iron and steel industries. Iron is essential for steel production. About 98% of iron ore is used in steelmaking. The following factors are expected to drive iron prices.




• Growth in global iron ore demand led by production growth in the global steel industry

• Rising iron ore production costs due to depleting higher-quality Chinese iron-ore resources, and increasing production from small, low-grade underground mines.

• Low iron-ore inventories in China To evaluate a junior exploration company, comparables are usually chosen based on target commodity, stage, region, type of deposit and market capitalization. We are not aware of any company that is a perfect comparable to WAI at this time. Therefore, we compared WAI based on the average Enterprise Value (EV) to resource ratio of a broad array of junior iron ore explorers, shown in the chart below.

Enterprise Value to Resource

AKI

RHI

ZIOC

CHM

EQX

AXI

CO

ADI

AUV

FEO

WAI

$-

$50

$100

$150

$200

$250

$300

$350

$400

$450

0 100 200 300 400 500 600 700 800

Fe Resource (MT)

EV

($

, m

m)

We valued WAI based on the currently known exploration target of 2.9 - 5.1 billion tonnes with average grades of 25% - 35% on the Sambalama and Kalyadi targets. For conservatism, we used a third of the lower end of the range (2.9 billion tonnes @ 25%) for valuation purposes. It should also be noted that we have not accounted for any potential upside from future resources that might be defined outside these two targets on the Forécariah permit, or on the Kérouané permit. As shown in the table below, WAI shares are the most undervalued in the list of 11 companies.




Risks

1 African Iron Limited ASK: AKI $280.98 221 $1.27 Republic of Congo

2 Red Hill Iron Limited ASX: RHI $95.44 86 $1.11 Western Australia

3Zanaga Iron Ore Company

LimitedAIM: ZIOC $392.81 590 $0.67 Republic of Congo

4 Champion Minerals, Inc TSX: CHM $177.70 276 $0.64 Quebec

5 Equatorial Resources Limited ASX: EQX $230.80 360 $0.64 Republic of Congo

6 Advanced Explorations Inc. TSXV: AXI $39.20 120 $0.33 Nunavut

7 Canadian Orebodies Inc. TSXV: CO $34.95 132 $0.26 Nunavut

8 Adriana Resources Inc. TSXV: ADI $178.20 729 $0.24 Quebec

9 Augyva Mining Resources Inc. TSXV: AUV $8.20 38 $0.22 Quebec

10 Oceanic Iron Ore Corp. TSXV: FEO $60.20 314 $0.19 Quebec

11 West African Iron Ore TSXV: WAI $30.22 242 $0.13 Republic of Guinea

Average $0.52

$0.46

* Resources = Measured and Indicated + 50% Inferred + 33.3% of Exploration Targets (lower end)

* Source: Capital IQ & FRC

* WAI's EV includes shares to be issued to SARI

EV /

ResourceLocation

Fair value of WAI

Resource (Fe

in MT)

Enterprise

Value (EV, $

mm)

SymbolCompany

WAI's EV/ resource ratio is $0.13 per Fe tonne versus the average ratio of $0.52 per tonne. Based on the average ratio of $0.52 per tonne, we estimate the fair value of WAI shares to be $0.46 per share.

Therefore, based on our review of the company’s projects, and our valuation, we

initiate coverage on WAI with a BUY rating and a fair value estimate of $0.46 per

share.

The following risks, though not exhaustive, may cause our estimates to differ from actual results:

• The success of drilling, resource expansion, and development are important long-term success factors for the company.

• At this time, the company has not defined a NI 43-101 resource, and does not own a




producing mineral property.

• The value of the company depends on commodity prices. • The political future of Guinea may be uncertain which will potentially have an affect

on project development and investor interest. • The current infrastructure is insufficient to support a bulk tonnage iron ore mining

operation. • The ability for WAI to attract a skilled and experienced mining workforce from outside

Guinea. • The relatively lower grade of ore defined to date may increase processing costs. • The ability to raise capital and share dilution.

We rate the company’s shares a RISK of 5 (Highly Speculative).




Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by WAI to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, WAI has agreed to a minimum coverage term including an initial report and three updates. Coverage can not be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. The distribution of FRC’s ratings are as follows: BUY (69%), HOLD (8%), SELL (4%), SUSPEND (19%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscribe.php for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

Documents

West African Iron Ore Corp (TSXV: WAI) - Initiating