Hudbay will serve VMS well. This deal will fund Vms exploration on their other properties. The company has no worries about cash. Hudbay will be a reputable partner in bringing Reed Lake into production and there will be more JVP deals down the road as Vms continues to work on their other holdings, which already have had a few years of detailed geophysics completed on them. Still 11 million left in the bank. No park issues, no native issues. Permitting will not be a concern. This agreement in the works to be finished in May, will put VMS on the map as a quality junior explorer with a steady income. This is what Instituitional Money is looking for. G.L.T.A.
Hudbay and VMS
shake hands on Reed Lake
Drill on VMS Tower Zone ~ a VMS website photoWritten by Marc Jackson, The Underground Press -Volumne 14/i10/2010 ssue 06 March 18/2010
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n simultaneous March 4th news releases, that no one seemed to be expecting, both HudBay Minerals and VMS Ventures Inc. announced that they had entered into a non-binding letter of intent, with respect to what HudBay describes as their own copper-rich Reed Lake property. The property in question is currently under option to VMS, but the two southern claims immediately adjacent to the Reed Lake property, as well as certain other adjacent exploration properties, which are100% held by VMS are also part of the letter of intent.
In a conference call later that day, HudBay’s Executive Vice Chairman and Interim CEO, Warren Holmes, explained the action by advising that it was the first step in advancing the development of the Reed Lake property. "Under the agreement, which remains subject to definitive documentation, HudBay and VMS will form a joint venture on the Reed Lake claim, as well as two prospective claims immediately south of the
See VMS on page 4.
Reed Lake property," said Holmes. Noting that HudBay will own 70% of the joint venture and act as operator, Holmes further stated, "We see the Reed Lake Project as an attractive near surface deposit that can provide feed to our Flin Flon Concentrator as our Trout Lake Mine reaches the end of its mine life. We are very pleased to be working collaboratively with VMS and intend to advance Reed Lake towards feasibility, with the aim of bringing it into production expeditiously."
The HudBay release made clear that upon execution of the definitive joint venture agreement, they would make certain cash payments to VMS in satisfaction of their obligation to earn back into the property and as consideration for VMS transferring the southern claims to the joint venture. In turn, VMS would abandon all disputes respecting the location of the boundary between the Reed Lake property and the southern claims.
"Upon establishment of the joint venture, HudBay will act as operator with authority and discretion as to the exploration and potential development of the Reed Lake property and will have exclusive rights to purchase and market the ore produced from the property," the release read. "HudBay would also provide full financing for VMS's proportionate share of the costs to develop the property, which would be repayable solely from VMS's share of cash flow generated by the project."
Further to this, the company release stated that, "The letter of intent also contemplates that, concurrent with entering into of the joint venture agreement, HudBay and VMS will enter into an option agreement, which will grant HudBay options to earn a 70% interest in four adjacent properties held by VMS, including the Tower Zone and their Super Zone properties. Upon making certain cash payments and meeting work commitments over two to three years, HudBay will earn a 70% interest in the applicable property and a new joint venture will be formed between HudBay and VMS which will have basically the same terms as the Reed Lake joint venture. Any failure to make the required cash payments and work commitments with respect to a particular property would cause that property to revert to VMS, but would not affect HudBay's option over the other properties."
Although the aforementioned conference call was arranged to discuss HudBay’s fourth quarter and year-end results, several of the questions at the conclusion of the call focused on the HudBay/VMS deal. The first one from Adam Schatzker of RBC Capital Markets, ultimately, didn’t receive any more than a monosyllabic answer. "On Reed Lake, I'm wondering, there was no mention specifically of what the costs are. Is there any guidance you can give and just a timeline for when you would hope to have a resource scoping study and a start of production," he queried. Holmes replied, "We are just in the process of developing a definitive agreement, so we will have to provide that guidance once we have that done." Schatzker persisted, "Any ballpark ideas of when you will have these." "Yes," laughed Holmes, offering nothing further.
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n the same call, Onno Rutten of UBS Securities asked if officials could elaborate a bit more on the permitting requirements for the Reed Lake property. "It is in a Provincial Park and we of course have experience dealing with those issues," said Holmes. "It has not been an issue in the past and we do not expect it to be an issue on this project." Vice President of Operations Tom Goodman concurred, " We previously had our Spruce Point Mine in that very same park; had a very successful closure with that mine and are on good terms with the regulators as a result," he stated hesitantly. "We have had discussions at fairly high levels with the Provincial political people and we are very positive that we don't think that there is going to be issues. Really, that mine would have a relatively small footprint. We aren't talking about a concentrator. It looks like it would be a portal with a very small physical footprint. And it is right on the highway."
"Is there any onerous timelines because of the area it is in," asked Rutten? "Say one or two years to permitting? Or will it be more of a formality?" "It is early days, but we believe not," Goodman replied. "It should be relatively simple." The Interim CEO reiterated Goodman’s answer, noting HudBay’s exceptional reputation. MJ VMS from page 2...