Canada’s next copper mine

The Company

VMS Ventures is focused on the acquisition, discovery and development of base metal deposits, primarily in Manitoba.

The company’s head office is in North Vancouver. VMS Ventures shares costs with North American Nickel, including costs for its four full time geologists, Neil Richardson, John Pattison, John Roozendaal and Mark Fedikow, who work from home offices in Manitoba and Ontario.

Business Plan

VMS’ strategic approach is to acquire projects within mineral endowed areas with the right geological formations, and potential for expansion of known resources. The group has a strong team of experienced mineral deposit and exploration geologists, combined with experience using the latest technology available to assist in locating untapped mineral potential.

For example, its work in Manitoba has centred on the Flin Flon-Snow Lake Greenstone belt located approximately 650 km north of Winnipeg. The belt is one of the richest per acre Volcanogenic Massive Sulphide deposits in the world.

The historical grade of all the deposits discovered there average approximately 2.5 per cent copper and 4.5 per cent zinc per tonne and typically with significant gold and silver credits. That’s one of the key reasons VMS was attracted to the Flin Flon region, and that’s where the Reed Copper discovery took place.

The Discovery

The Reed Copper deposit was discovered by VMS Ventures in 2007. In October of that year the company announced an intercept of 43 meters assaying 4.38 per cent copper (@ $3.19 lb Cu that’s $308.03 rock just in the Cu) and within it a higher grade section of 10.50 meters in length assaying 11.19 per cent copper per tonne – $786.96 per tonne.

This news attracted worldwide attention because of its impressive copper grade (more than twice the average for even this rich belt), resulting in VMS’s share price increasing by over 1000 per cent. Over two years, VMS Ventures traded two billion shares and reached a peak of $1.70 per share. VMS Ventures also raised $20 million, led by Toronto-based Griffiths McBurney and Partners, which helped finance the drilling of the deposit and has resulted in VMS only conducting two financings since 2007. Having a financing lead by GMP and making a discovery in such as historic belt certainly enhanced VMS Ventures’ reputation as an explorer and as a venture investment.

Many of the world’s exposed or shallow mineral deposits have already been discovered, but new technologies are allowing geologists to see deeper and evaluate large areas faster. With this in mind, VMS Ventures used a new helicopter-borne geophysical technology, called VTEM, to discover the high-grade copper deposit at Reed Copper, a mature mining camp, in record time.

In the past, electro-magnetic anomalies detected from the air needed to be precisely located on the ground before being drilled, which required expensive and time-consuming surface geophysical surveys. However, using the VTEM helicopter mounted geophysical system VMS could ‘see’ below the cover rocks, lakes, swamps and soil which overlie the prospective volcanic rocks and detect otherwise ‘blind’ mineral deposits in the Flin Flon belt.

VMS Ventures was one of the early companies in the Flin Flon belt to drill directly from airborne data and this meant the team could fly, drill and discover all in the same year. This is important as there are numerous areas with prospective targets that are situated under swamps or lakes and they can only be accessed during the frozen winter months, greatly narrowing the exploration window. Speeding up the process of identifying a target, evaluating it and drill testing priority anomalies all within the same season is a tremendous advantage that earlier explorers were without.

The discovery was made when a strongly magnetic anomaly with a coincident strong conductive airborne geophysical anomaly was drill tested in an area the company’s technical team had been exploring and had earlier in the year flown with the new VTEM airborne geophysical system. The challenge was that the host rocks to these deposits were covered in this area by a 20m thick layer of younger rocks and so remained hidden from previous explorers in the area.

The Partnership

In 2010 the VMS Ventures team signed a Joint Venture Agreement with Hudbay Minerals Inc. for the Reed Copper project. As the discovery was made on ground that had been optioned by VMS from Hudbay, the JV agreement established that Hudbay would hold a 70 per cent and VMS a 30 per cent interest in the property and act as the operator.

Another feature of the agreement was that VMS Ventures’ portion of the mine construction costs would be financed by Hudbay to production and that its 30 per cent share of the capital expenditures be paid back out of the proceeds of production. This eliminated the risk posed by poor capital markets during the time of construction as well as freeing up the company’s treasury which sits at just over $6 million dollars, for future acquisitions to continue growing the company even while the mine is in development and production.

From VMS Ventures’ perspective, having access to Hudbays’ Flin Flon operations and infrastructure, along with the high grade and near surface nature of the deposit, greatly helped the project economics by reducing the capital expenditures necessary to bring a future operation into production. This was proven true when positive preliminary economic study was announced by Hudbay in late 2011 along with the decision to mine the deposit.

What’s Next?

The ground-breaking ceremony for the Reed Copper project took place in August last year, which means the project is on its way to becoming a producing mine.

According to VMS Ventures, the team tasked with constructing the mine and managing the project has done an excellent job in keeping the project in-line with the capital expenditures budget of approximately $72 million and overcoming the various technical and engineering challenges that come with any new mine development.

The mine itself is in a fortunate location, contributing to the lower development costs and reducing the logistical challenges related to developing a new project. The Reed Copper deposit is located only 100 metres from an all season paved Provincial highway, and the top of the deposit begins just 25 metres below surface.

The Reed Copper mine is expected to begin production later this year and reach full production in Q2 2014. The mine life is currently estimated to be approximately six years though once production has commenced, underground drilling to explore for additional mineralization to grow the resource and lengthen the future mines life will begin. In the meantime VMS and its partner continue to explore the prospective area around the Reed Copper development for new deposits.

By the second quarter of 2014, VMS Ventures plans to reach full production of approximately 1,300 tonnes per day, from a probable reserve of 2.16 million tonnes and average grade of 3.83 per cent copper, 6.02 g/t silver and 0.48 g/t gold and recoveries of 94 per cent for copper, 62 per cent for silver and 58 per cent for gold.

After recoveries are factored in that rock is worth $272.81 tonne at spot prices of $3.25 Lb Cu, $1363.60 oz Au and $23.16 oz Ag. That’s $354,653.00 worth of production per day over the current life of mine – six years. Remember VMS is carried by HudBay to 30% of production – $118,217.00 per day coming VMS’s way after payback of production costs.

Greenland

The Maniitsoq nickel-copper-cobalt & PGM project in southwest Greenlandis a district scale project at 4,841 square km and contains the 70 kilometer long Greenland Norite Belt (GNB). The project is 100% owned by North American Nickel TSX.V – NAN. NAN’s mineral exploration licence covers numerous high-grade nickel-copper sulphide occurrences associated with norite and other mafic-ultramafic intrusions.

The 70km plus long belt is situated along, and near, the southwest coast of Greenland, which is ice free year round.

On August 23 2013, North American Nickel announced that diamond drill hole MQ-13-026 intersected an 18.62 m core length of sulphide mineralization averaging approximately 40-45% total sulphides, including numerous sections containing 65-80% sulphides, within norite host rocks at the Imiak Hill nickel-copper-cobalt zone.

Another new discovery has been made with diamond drill hole MQ-13-029:

MQ-13-029, beginning 57.75 metres down the hole, intersected 55.75m metres of sulphide mineralization, including;

– 9.99 metre core length of near solid to solid sulphides averaging approximately 30-40% total sulphides, and

– 45.76 metre core length of disseminated, blebby and net textured sulphide mineralization averaging approximately 3 – 5% sulphides.

The discovery, named Imiak North, is 950 metres northeast of the previously announced Imiak Hill intersections and 1200 metres northwest of the previously announced Spotty Hill discovery.

VMS Ventures owns 27% of North American Nickel TSX.V – NAN.

Conclusion

VMS Ventures has a “maturing” story to tell with the Reed Copper Project, and in only a few months, the company will have its first  producing mine.

BMO recently initiated coverage on HudBay Minerals and included this little blurb on the Reed Copper Project:

“BMO Research forecasts 2013 contribution from Reed of ~1.6kt copper (4.5% of consolidated copper production), ramping up to 15–16ktpa (30–40% ofconsolidated copper production in Manitoba) over the next 4.5 years.”

 VMS Ventures, with its coming cash flow and exploration homerun potential in Greenland, should be on everyone’s radar screen.

Is it on yours?

If not, maybe it should be.