VANCOUVER — Manitoba’s Flin Flon greenstone belt has been yielding high-grade copper and zinc from its volcanogenic massive sulphide ore bodies for almost 85 years, but VMS Ventures (VMS-V) thinks there’s lots of mineralization still yet to be found.
The company has assembled a sizable property package in the Flin Flon area, second only to Hudbay Minerals (HBM-T, HBM-N) itself, with the intention of finding the belt’s hidden deposits.
“Much of that belt is covered by a limestone or dolomite cover,” said VMS CEO Rick Mark by phone. “It was our contention that most of the discoveries that have been made over the past eighty years have been made north of that cover where the rocks stick out. But the VMS belt continues below the dolomite cover, and there’s lots of opportunity if we can see through the cover.”
The company spent $3-million in 2006 and 2007 flying 17,000 link-km of VTEM over its property to see below that cover, and in its second drill hole following up on the survey hit a 10.5-metre intercept grading 11.19% copper. That hit later led to the Reed copper deposit, which VMS Ventures now has joint ventured with Hubay in a 30-70 split.
Hudbay, operator of the project, released a prefeasibility study on the project in early April that outlined probable reserves of 2.2 million tonnes grading 3.83% copper, 0.48 gram gold per tonne, 6.02 grams silver per tonne, and 0.59% zinc. The mine should produce roughly 17,000 tonnes of copper in concentrate per year over the five-year mine life.
Based on US$2.95 per lb. copper, the Reed project has a net present value of $57.4 million with an 8% discount and an internal rate of return of 34.7%. All of the financials dropped slightly compared with the initial scoping study released in November despite the earlier study being based on US$2.78 per lb. copper, thanks in part to fewer tonnes milled.
VMS Ventures is carried through to production on the project, which Hudbay plans to achieve by Q3 2013. Once it pays off its share of the capex with mine production VMS could stand to come in with a nice windfall.
The original vendor of the project, W. Bruce Dunlop, has other ideas though. He recently filed a statement of claim seeking to switch the 30% participating interest in the project for a 2% net smelter return royalty. VMS says the current arrangement is much better for shareholders and it will defend against the claim.
With the Reed project moving ahead and out of its hands, VMS is trying to repeat the success of the Reed discovery elsewhere on the covered part of the belt. The company has struck four separate joint ventures with Hudbay on nearby properties and is also trying to explore its significant wholly-owned land holdings in the area.
This past winter was a tough one for exploration though, as mild temperatures made the winter drill program in the lake and swamp-filled area difficult. Hudbay had been trying to drill below the Reed deposit to see how much it extends at depth, but drillers had to abandon the hole designed to hit the 500-800-metre region once the ice began to break up early. A second deep hole that hit the projected zone at a km down did not hit significant sulphides.
Hudbay’s exploration on the Reed North joint venture also proved challenging this past winter, with two holes abandoned, and only one of the four holes started hitting significant mineralization. That hole was number 31, returning 1.1 metre grading 12.63% zinc, 0.76% copper, 1.44 grams gold and 5.45 grams silver from 561 metres downhole. The companies have yet to find significant lenses at Reed North.
With Hudbay putting up the money to explore the Reed camp, VMS Ventures plans to drill several of its own projects this year including Cowan River, Morton Lake, Puella Bay and McClarty.
VMS Ventures dropped 6¢ or 20% to close at 25¢ on the latest drilling news, but rebounded somewhat the next day to 29¢. The company has a 52-week share price range between 24¢ and 68¢ and has 129 million shares outstanding. VMS had about $11-million in the treasury in March, and also holds a 45% interest in North American Nickel (NAN-V).
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