VMS Ventures Inc.: Reed Copper Project Positive Pre-Feasibility Study Completed

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 2, 2012) - VMS Ventures Inc. (TSX VENTURE:VMS) ("VMS" or the "Company") is pleased to announce that Hudbay Minerals Inc. (TSX:HBM)(NYSE:HBM) ("Hudbay") has informed the Company that a NI 43-101 pre-feasibility study completed by Hudbay and Stantec Consulting Ltd. (North Bay, Ontario) outlined positive economics for the Reed Copper project. VMS owns 30% of the Reed Copper project joint venture, which is operated by Hudbay and is located 120 km from Flin Flon, Manitoba. According to Hudbay, first production is expected by Q3 - 2013.

Reed Copper Deposit Mineral Reserves1 - March 30, 2012
Category Tonnes Au (g/t) Ag (g/t) Cu (%) Zn (%)
Probable 2,157,000 0.48 6.02 3.83 0.59

1Shown as 100% of the mineral reserves; VMS has a 30% interest in the Reed Copper project joint venture.

VMS Ventures CEO, Rick Mark, remarked: "We are pleased with the results of the pre-feasibility study and how closely it compares to the PEA completed in December 2011. This demonstrates the robust nature of the Reed deposit. First production in Q3 - 2013 is good news for VMS shareholders. We will continue to add value to the project by evaluating trade-off studies, not included in the pre-feasibility, with Hudbay's mining team and remain optimistic about adding tonnage down dip at Reed. For those bullish on the copper price in 2014, and beyond, the cash flow projections are most encouraging."

A summary of the project's economic assessment follows (100% basis):



News Link



PS: Jeff I bought on news, I think VMS has good prospects, compared to some my other picks of the past.

All the best,

Auriferous

Auriferous, there is lots to like about this announcement (and project).

1) The grades (for the copper) are VERY robust
2) Production projected to commence in 2013, and full production by 2014
3) An IRR ("internal rate of return") of approximately 35%

Let me quickly review those points:

Their copper resource grades close to 4%, and anything above 1% is generally considered commercially viable (and sometimes even LOWER grades in large deposits). So we know that this project will generate lots of PROFITS. Along with that the company expects excellent RECOVERIES in its processing (copper recovery above 90%).

As I've discussed before, with energy costs certain to soar much further in the future, companies with robust grades (and economics) like this are INSULATED from that price shock (at least to some extent). It's the low-grade open-pit operators who are going to get CRUCIFIED as oil moves to (and above) $200/barrel.

Then there is the short time-span for construction. One of the questions I had intended to ask was "how friendly is the geography, and is there any infrastructure in the area?" The fact that the mine can go into full production in two years is a clear answer to that question. Obviously the geography is NOT a problem, and infrastructure MUST be reasonably accessible - or they couldn't bring a mine this size into production so quickly.

And this brings us to the IRR - how long it will take the company to PAY OFF the costs of this project. Again we see a very positive number. An "internal rate of return" of 35% means that each year 35% of the construction costs are paid off - meaning that in less than three years the mine will fully pay for itself, and generate nothing but profits from them on.

Generally investors should look for projects with IRR's of 25% or better, as if its takes a miner LONGER than 4 years to pay off a project - in our environment of soaing inflation - that creates a LOT of uncertainty about a project.

At this point in time (as I mentioned previously), I'm more comfortable with LARGER companies and projects - as they are somewhat less sensitive/vulnerable to the banksters' manipulation of commodity markets and commodity producers.

The only "wild card" here is what will the global economy be like at the beginning of 2014? Will the psychopaths have caused another global "crash" at that time? OR, will they be sending the world into another inflationary? Obviously in the SECOND scenario projects like this will do much better than in the first scenario.

P.S. The last point which is encouraging is that this report is a FOLLOW-UP to their previous "preliminary economic assessemnt" (PEA) on the same project, and the numbers are VERY similar second time around. This offers an additional degree of certaintly about the economics of the project.

For those not familiar with HudBay Minerals, I should probably add that this company is a VERY well-respected mid-tier base metals producer, sitting on LOTS and LOTS of cash - and with a very competent/experienced management team.

Thanks Jeff, (" there is lots to like about this announcement (and project)."

Your points always clear.

If Im correct VMS has some $10M in cash or equivalences.

An excellent partner & operator with Hud Bay.

IMHO I bought for the cash flow, something in the $20-25 M / yr for VMS's 30%.

EPS estimated maybe ~ 0.10 ... market value .... ?

I'm long with VMS.

All the best Jeff.

Auriferous

Auriferous wrote:
Thanks Jeff, (" there is lots to like about this announcement (and project)."

Your points always clear.

If Im correct VMS has some $10M in cash or equivalences.

An excellent partner & operator with Hud Bay.

IMHO I bought for the cash flow, something in the $20-25 M / yr for VMS's 30%.

EPS estimated maybe ~ 0.10 ... market value .... ?

I'm long with VMS.

All the best Jeff.

Auriferous

Just to clarify for newer investors here. After I said all these very nice things about HudBay, one might wonder why Auriferous chose to invest in VMS (the JUNIOR partner in this joint venture).

It's quite simply a matter of leverage. Hudbay is ALREADY a big base metals producer, so even with this large increment of new production it's not going to produce a HUGE move in the company's share price by itself.

Conversely, for VMS this is their MAIN project, and with a much, much smaller market cap; when it goes into production it will make a much bigger difference to the smaller company in this partnership.

At the same time, for people who are wanting something STABLE (to go along with a lot of juniors), then Hudbay could be considered more-or-less a "blue chip" stock among base metals producers.

Generally speaking, projects like this where a smaller company is able to team up with a larger miner (with a GOOD reputation, not like a Glencore) are often GREAT scenarios for investors. On the one hand, having a "Big Brother" to help shepherd the project along takes away a lot of the RISK. On the other hand these smaller miners are STILL generally discounted considerably - and so there will likely be lots of upside remaining here.

Note that buying the smaller player here DOES add risk. Should we see some crash scenario ahead of us, the SMALLER companies almost always take it on the chin more severely than the larger ones. So people must always manage their OWN risk appropriately in such situations.

VMS Ventures Inc.: Reed Copper Project and Reed North Area Exploration Update, Snow Lake, Manitoba


VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 24, 2012) - VMS Ventures Inc. (TSX VENTURE:VMS) ("VMS") announces results from the 2012 winter drilling program at the "Reed Copper project" and "Reed North". The operator of the projects is Hudbay Minerals Inc. (TSX:HBM)(NYSE:HBM) ("Hudbay").

At the Reed Copper project, one hole was completed and one hole was abandoned due to deteriorating ice conditions. A total of 1,632 metres were drilled. Near the Reed Copper deposit, hole RLE030 was drilled to a depth of 725 metres testing a Time-Domain Electromagnetic anomaly. In the Reed North area, two holes were completed and two other holes were abandoned. A total of 1,475 metres were drilled at Reed North.

Site preparation is now on-going for the underground development of the Reed Copper project. Trenching for the portal entrance has begun, an office trailer has been mobilized to the site and other surface infrastructure has been established.

Neil Richardson, VMS' Chief Operating Officer, states: "We were disappointed to lose the initial hole testing for the down plunge extension of copper rich Zone 10 at Reed, so we will have to wait until next winter to determine the presence of mineralization between the 500 and 800 metre levels. Drilling of the Reed North area continues to show interesting intersections, but no significant lenses have been discovered to date. The trenching of the portal entrance at Reed has begun and represents the first milestone in bringing this deposit to commercial production."

Two holes tested the down plunge continuation of the high grade copper lens (Zone10) below the current planned mining levels. The first hole, RLD040, was collared on an un-named lake just south of the deposit. This hole reached a depth of 526 metres before the drill was pulled off the collar site due to deteriorating ice conditions. Hole RLD041 was collared and intersected the projected Zone 10 horizon around the 1,000 metre level. No significant sulphides were noted in the core at that depth. Follow-up BHPEM survey failed to detect any significant sulphides. The 500 to 800 metre level of the projected Zone 10 horizon remains untested.

Four holes were collared in the Reed North area. Two holes reached their target depth and two were abandoned due to drilling problems. Hole RLE031 intersected 1.12m of 12.63% zinc. Follow-up hole RLE034 targeted the up-dip projection of this Zn-rich lens, but failed to intersect any significant economic mineralization.

Hole RLE030 targeted a time-domain electromagnetic anomaly situated between the Reed Copper deposit and the Highway Zone. This hole intersected near-solid pyrrhotite that explained the EM anomaly, but no economic sulphides were observed.

REED COPPER AND OPTION PROPERTIES ASSAY DATA

Hole Number From (m) To (m) Length (m) Cu % Zn % Au (g/t) Ag (g/t)
RLE031 561.40 562.52 1.20 0.76 12.63 1.44 5.45

RLE030 No Significant Assays

RLE034 No Significant Assays

RLD041 No Significant Assays
True widths unknown

REED COPPER AND OPTION PROPERTIES COLLAR INFORMATION

Hole Number UTM East (1) UTM North (1) UTM Elevation (1) Azimuth (2) Dip Length (metres)
RLE030 393950 6049135 295 30 -55 725.00
RLE031 395191 6050361 292 360 -60 604.00
RLE032 395191 6050361 292 360 -52 81.00
RLE033 395191 6050361 292 360 -52 143.00
RLE034 395191 6050361 292 360 -52 630.00
RLD040 393600 6048550 290 335 -62 526.00
RLD041 393035 6048643 292 35 -68 1090.00

(1) Universal Transverse Mercator / North American Datum 1983 / Zone 14
(2) "Azimuth" is degrees from True North

REED COPPER PROJECT JOINT VENTURE UPDATE

On April 2, 2012, VMS and Hudbay announced a positive prefeasibility study on the Reed Copper project. For details see press release dated April 2, 2012 available at: www.vmsventures.com. Highlights include production commencing Q3 2013, average expected reserve grade of 3.83% copper with a 94% recovery rate.

On December 19, 2011 VMS and Hudbay announced a preliminary economic assessment and technical report on the Reed Copper deposit.

On July 6, 2010 VMS and HudBay announced they had entered into a joint venture agreement in which HudBay and VMS have 70% and 30% interests, respectively, in the Reed Copper project and two claims immediately south of the deposit. The parties have also entered into four option agreements which grant HudBay the right to earn a 70% interest in properties held by VMS and adjacent to the Reed Copper deposit property.

For additional details on the Reed Copper deposit, see VMS' NI 43-101 compliant technical report entitled "Technical Report Reed Deposit, Central Manitoba, Canada" dated March 31, 2011 available at www.sedar.com.

QUALIFIED PERSON

All technical information in this release has been reviewed by Dr. Mark Fedikow, P.Geo, who is the Qualified Person for the Company and Vice President of Exploration and Technical Services, VMS Ventures Inc.

QUALITY ASSURANCE AND QUALITY CONTROL

Exploration core drilling was NQ size. The core was logged and mineralized intersections were marked for sampling and assaying by geologists and geotechnicians employed by HudBay's Hudson Bay Exploration and Development Company Limited (HBED) subsidiary. The marked intersections or intervals were sawn in half by a diamond saw and one half of the core was placed in plastic bags and tagged with unique sample numbers, while the second half was returned to the core box and stored. Each bagged core sample was transported to HudBay's Hudson Bay Mining and Smelting Co., Limited (HBMS) subsidiary's assay laboratory in Flin Flon, Manitoba where it was dried, crushed and pulverized and a 250-gram sample was prepared for assaying at Acme Analytical Laboratories Ltd., an independent company in Vancouver, B.C., or the HBMS assay laboratory. From each 250 gram sample 0.25 grams was removed and leached in aqua regia and analyzed by ICP-AES for Ag, Cu, Zn, As, Pb, Ni and Fe. Also from the 250 gram sample, 30 grams were removed for gold determination by fire assaying with an ICP-AES or gravimetric finish at the Acme laboratory or an Atomic Absorption or gravimetric finish at the HBMS laboratory.

Assay integrity is monitored internally with a quality control program, which includes the use of standard reference materials, blanks, duplicates and repeats and externally through national and international programs. In addition, within each group of 20 core samples, one core sample has a second 250 gram split collected that was check assayed at a different laboratory, either the HBMS laboratory in Flin Flon or at the Acme laboratory in Vancouver, B.C. This news release provides core lengths and estimates of vertical thickness only. True widths are not provided. Where metal assays are provided for intersections they are either a single assay of a sample of the entire intersection length or a composite of assays calculated from interval weighted assays over the intersection length.

About VMS Ventures Inc.

VMS Ventures Inc. is focused primarily on acquiring, exploring and developing copper-zinc-gold-silver massive sulphide deposits in the Flin Flon-Snow Lake VMS Belt of Manitoba. The Company's VMS project property portfolio consists of the Reed Copper Project, McClarty Lake Project, Sails Lake Project, Puella Bay Project and Morton Lake Project. Outside of the Snow Lake camp, the Company holds massive sulphide prospective properties near the past producing Fox Lake and Ruttan copper-zinc mines, near the communities of Lynn Lake and Leaf Rapids in northern Manitoba. These properties are located in the mining friendly province of Manitoba, Canada. The Company also has optioned three properties in the Sudbury mining camp. They are Terra Incognita, Golden Pine and Black Creek.

VMS Ventures owns approximately 45% of North American Nickel Inc. (TSX VENTURE:NAN). For more information on North American Nickel Inc., please visit www.northamericannickel.com.

ON BEHALF OF THE BOARD OF DIRECTORS

John Roozendaal, President

VMS Ventures Inc.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Auriferous, I didn't realize when you first mentioned this one that it was SO far north. So I'm gathering by what was implied by the drilling news that they can ONLY drill during the winter months when the permafrost is solid.

Do you know what the situation would be like if/when a mine was operational? In other words it would take a lot of the profitability out of the project if they couldn't mine 12 months a year.

Then again, (if memory serves me correct) don't they already have a pre-feasibility study done on this project - with a very respectable IRR?

Maybe I'm getting confused with another company/project...

Thanks Jeff,

You might be thinking of another project .... to answer your questions as they relate to this Hud Bay & VMS project. I called the IR dept.

Here's a summary of what I was told.


The nearest past producing mine is only 10 miles away and produced in the early 80's is the exact same climate.

This deposit is sitting beneath high ground actually but there is low ground in some areas nearby the deposit and unfortunately the ideal location to drill a deep hole approx 1km deep, to test for a deeper deposit just happened to be located in a wet area which needed several feet of ice thickness to support the weight of the drill and in the unusually warm winter this year, the ice melted beneath the drill so that hole will be continued next winter.

Unless a target is either under water or the location from which to best drill test the target is under water generally there is no problem with in the summer or winter. The exception is the period of time known as break up/freeze up in the spring and fall when the ground is wet and passing over it with large equipment is either not possible or has the potential to damage the land and so waiting a few weeks or a month for the ground to dry or freeze is how they deal with that.

The region where the mine is located has been mined successfully for the past 80 years. Almost all of the mines in the are are underground so only the upper meters of ground are frozen and so winter has no major impediment to mining activity so they will mine all year round.

I hope this clarifies and helps.

All the best,




Auriferous

For anyone who might be interested I recieved this email from the CEO of VMS ( I signed up as shareholder)I found it informative and helpful.

____________________________________________________________________________________


Dear VMS followers,

I’m writing to respond to two issues, or misconceptions, some shareholders had regarding yesterday’s release. I hope I can put to rest concerns about both.

1. “Do these drill results mean the mine won’t go ahead?”

I thank one of our largest shareholders for calling early this morning and discussing the release and the reactions some in his network of investors had to the release and their concerns about the viability of the Reed mine project, itself.
None of the drilling announced yesterday targeted the deposit itself, and so, has no bearing on the size or grade of Reed, or Hudbay’s plans to mine the Reed copper deposit starting next year.

The drilling at Reed we announced yesterday was designed to test for additional tonnage. We have a strong anomaly suggesting the copper rich Zone 10 lense of the deposit goes deeper. We were looking for that “down plunge extent of the copper rich Zone 10 at Reed”, as reported yesterday.

Unfortunately, the ice melted and the drill was stopped on its way to test below the Reed deposit. The 1,000m hole was stopped 500m from its target. We are still hopeful that Zone 10 extends into the 500m to 800m area below the known deposit and will look to test the same anomaly next winter, ahead of mine production.

In summary, yesterday’s release has no impact, whatsoever, on the announced mine plans for the high grade Reed copper deposit.


2. “What percentage of the Reed development will VMS be on the hook for?”

As I replied to this today “Our 30% share of the capital costs (30% of approximately $75M) is approximately $22.5M. That will come out of early revenue from the mine. Present projections suggest that payback of the $75M will be complete within the first year of production. After that, we expect cash flow to VMS for the remainder on the mine life (5 to 6 years). Our calculations, at these copper prices, suggest approximately $100M to VMS over the mine life.” We are carried to production.
This slide from our most recent Corporate Presentation describes our internal calculations using the January, 2012 PEA numbers and provides perspective on Reed’s value to VMS shareholders, based on copper prices as shown.

Prefeasibility 3 Year Historical
Base Case (1) Average Price Case (2) Cu = $3.75/lb USD (3)
Price and Exchange Averages
Copper (USS/lb) $2.95 $3.20 $3.75
Gold (US$/oz) $1,269.00 $1,235.00 $1,235.00
Silver (US$/oz) $24.78 $22.85 $22.85
US$/CDN$ 0.95 0.94 0.92
Pre-tax Cash Flow $102,426,000 $182,975,000 $300,964,000
NPV 8% $57,443,000 $109,904,000 $191,361,000
IRR 34.70% 46.60% 68.40%

(1) Prefeasibility Base Case metal prices projections compiled by HudBay based on 11 well-known financial institutions.
(2) Bloomberg three year historical average (December 1, 2008 to December 1, 2011)
(3) $3.75 copper price for perspective on valuation impact of copper price


While exploration results yesterday were disappointing, our primary asset remains on track to deliver tremendous value to the Company.
I do appreciate your calls and thank you for the feedback.


Best regards,

Rick Mark
CEO
VMS Ventures Inc.

VMS owns ~45% of North American Nickel

______________________________________________________________________________________

Auriferous, maybe it's just that I'm SLIGHTLY more experienced as an investor than the general public, but I didn't experience any concerns about the deposit (i.e. the GEOLOGY) from yesterday's release.

To me it was crystal clear that the only reason they got "no result" from a couple of holes was because the ice had melted - NOT because they didn't hit metal.

But that brings me to my REAL question: the geography/climatology. In this respect I'm not being adversarial at all - I simply DON'T UNDERSTAND.

Obviously with a very well-respected company like HudBay participating we KNOW that this is not some "fly by night" project, but rather MUST be economically viable - or at least strongly SUGGESTIVE that it is.

So my question is ultimately "how profitable"?

Once the drilling is done and the mine is built (presumably), will they be mining 6 months a year, 8 months a year, or all year round? And in that respect while I suspect that their feasability report on the project would account for any geography constraints, it's something that I (honestly) don't know for certain.

So speaking as the proverbial "potential investor" it's not that I'm skeptical about the project, but just in need of greater understanding. This is why (as of now) I'm not invested in ANY "far North" mining projects - because I haven't had the time to research the geography issues myself, and it's something that I haven't seen made clear in the news releases of these companies.

P.S. The ONE reason why all investors should become familiar with climate/geography issues before investing in Far North projects is global warming.

IF a mine can only be operated when the permafrost is solid AND our planet is steadily getting warmer, then a mine which (hypothetically) could operate 8 months a year today MIGHT only be able to operate 6 months a year 5 years from now.

This importance is MAGNIFIED when we think of the extended period of time it will take to construct the mine. So a project which might look GREAT (economically) if it's able to operate 8 months a year may look a LOT less appetizing if (by the time construction is completed) it's only operating 6 months a year...