VMS VENTURES INC. VMSTF

Mr. Richardson, P. Geo., has over 22 years experience in mineral exploration and mining operations of base metal and precious metal deposits throughout Canada. Neil worked for HudBay Minerals Inc. as a Senior Exploration Geologist responsible for greenfield and brownfield projects in the Flin Flon - Snow Lake area. He was part of a team that discovered a number of new mineralized zones throughout the belt.

Rick: Neil can you give us a little bit of the history and the focus of VMS?

Neil: VMS Ventures changed its name from Rare Earth to VMS Ventures in 2005. Rick Mark, John Roozendaal and crew acquired a large land position in the Snow Lake - Flin Flon Greenstone belt. They mainly focused on the opportunities waiting under the sub-Paleozoic cover, that’s about 2/3’s of the belt.

If you look at what was mined to date, you’ve got about $50 billion worth of metal extracted in the upper third, that’s the exposed part of the shield, and under the Paleozoic cover you have limited exploration, and of course, 2/3 of the belt.

Rick: Tell us about the discovery hole for Reed Lake. It’s a great story.

Neil: John Roozendaal, the President and founder of VMS, gets a lot of the credit. John recognized the chalcopyrite mineralization and chloride alteration, but didn’t think it was enough to explain the anomaly, so he swung the drill around, drilled, and low and behold, came up with 40 meters of really good copper grade.

They kept drilling it, put 72 holes into the system and eventually it got to the current indicated resource of 2.55 million tonnes of 4.5% copper. What we’re going to be focusing on with our joint venture partner HudBay is moving Reed Lake forward, first a preliminary economic assessment (PEA) and then the construction phase.

Rick: Tell us about HudBay. What got them interested in doing a joint venture with you on the Reed Lake discovery and optioning the surrounding properties?

Neil: Their Trout Lake Mine is coming to a close, so obviously there is going to be some milling room available in their mill facility in Flin Flon. Reed Lake is a near surface deposit, we’re basically right underneath the Paleozoics by about 20 meters vertically so this will be a very quick access for them.

If the construction phase and the preliminary economic assessment is feasible, we can easily look at producing by the beginning of 2013. So, that’s one reason why they got involved with Reed Lake and with the rest of the option properties.

Another reason is this is a very prolific belt, one of the richest VMS belts in the world, and that’s why you’ll continually see HudBay have a presence here.

Rick: What’s the difference between the Reed Lake deposit and the Trout Lake deposit HudBay is mining now?

Neil: The difference is Trout Lake is in bimodal volcanism. When you talk bimodal volcanism, those are your bigger deposits. Trout Lake has over twenty million tonnes mined. It’s generally zinc rich, similar to the Callinan, the Triple 7 and the Main Mine. You do get good copper grades and gold grades as well, but generally they’re more zinc/copper-type deposits.

Reed Lake itself is in mafic metavolcanics, so it would be very typical to what was mined on the western side of Flin Flon Greenstone belt over in Saskatchewan where you had Coronation, the Birch Lake, Flexar and the Konuto Lake Mine, which is the most recent past producer of that western side of the belt.

These are basically copper-rich deposits hosted in the basalts, generally zinc poor, but very copper rich, and relatively on the small side. So generally you are only looking on the 1.2 to 3 million tonne range for those deposits, and Reed Lake fits within that at 2.55 million tonnes indicated.

Rick: Tell us about the VMS properties HudBay has currently optioned surrounding the Reed Lake/HudBay Joint Venture with VMS.

Neil: VMS had one area called the Super Zone, we broke it down into four different areas because we ended up making four different option agreements. We have the Northwest, the Super Zone, the Northeast, and then the Tower Zone.

Rick: HudBay optioned all four as well as committing to the Reed Lake Joint venture?

Neil: Yes, and I think the reason HudBay optioned all four is the targets that were remaining, and still to be tested, looked very good. We had all the work done that they needed to move forward.

These were all drill ready targets. We already had the VTEM interpreted and already had the magnetic surveys completed as well. We did do some time domain overtop of the old Highway Zone that was actually discovered by Freeport McMoRan back in the 1970’s, but is now part of the HudBay claim in the area.

So, we had a lot of good information for them to move forward on and we had a lot of targets that remained to be tested. They felt that this had the potential for a new camp.

Rick: Because of their nature, VMS deposits occur in clusters?

Neil: These deposits do occur in clusters, and it’s starting to prove up that way. We have the Highway Zone, albeit, relatively low grade, but there is some decent grade within it in places, we have our discovery, Reed Lake, actually the Reed Copper deposit as we’re calling it now, and of course, we also have the Reed North Property, in the Super Zone area, that’s starting to show some promise. We have some ore grade intersections in there, we’ve just got to get a better handle on some of the geology and the orientation of the mineralization. Also right on Magoo Lake itself there is an old copper showing, drilled back in the 1970s, early 1980s by Noranda.

So you can see there’s lots of smoke in this area as I’ve just talked about, one deposit and three zones. These things do occur in clusters, and this is why I think they’re very interested in these projects.

Rick: There’s been some exciting news coming off the Reed North project.

Neil: The Reed North is an interesting play and it’s really got me intrigued. We already have three lenses defined, just like we had at Reed, but at Reed they’re all hosted in basalts while at Reed North they are in bimodal volcanism. Yes there could be another deposit below Reed Lake, similar to Reed Lake, sitting there with another million or two million tonnes but the big ones, like to get the 10, 15, 20 million tonne range, I think that opportunity is up at Reed North, and I’m getting excited about what I see up there from the borehole geophysics, from the drilling that they’ve completed to date.

Trout Lake was an operation that had 50 different lenses within it, all within basically a bunch of zones called the North, the South, the HIO, and the C Zone, so about four different main zones, but within that deposit, 50 different lenses. So, that just shows the opportunity you have when you’re into the bimodal volcanism.

It’s starting to unfold a little bit, we haven’t yet hit a home run there, but obviously HudBay is just as interested as we are. HudBay drove a dozen holes into it, it’s a matter of sometimes ore bodies aren’t that easy to find, but I think we’re on the right track. We do see bimodal volcanism. We have some good alteration. We do see stringer sulfides and near solid sulfides, and there are ore grade intersections within it. It’s a matter of putting it all together.

We’re having multiple horizons here now, we’re getting two mineralized for sure, one still ahead of us that we haven’t tested, so we don’t know. I’ll be optimistic and hope that it’s a mineralized event, but it could also be a noneconomic sulfide horizon, we’ll see. I think it’s looking very good for Reed North, it’s a matter of a few more holes, some deep penetrating surveys and we’ll see what we can make of it.

Rick: And that’s the target model, this bimodal volcanism, that we’re looking at with the new Reed Lake North Zone and the Super Zone.

Neil: That’s correct. I’m looking at those targets up there just like Trout Lake. I worked at Trout Lake for numerous years as an exploration geologist for the mine, so I know quite a bit about it. The thing you look at is you come out of some of those mineralized zones, you’ll have spaces between those zones for some distance, where you don’t really have very good mineralization, or you’re stepping onto another horizon, and sometimes it’s not quite there, but suddenly low and behold, you get onto a horizon with ore grade intersections.

Basically the thing I say to people is, you’ve got to be a little patient, Trout Lake is a great success story. If you look back to when it was discovered by Granges in the 1970s, they went into production with just over two million tonnes. After 20 years of mining, it went to over 20 million tonnes. So that tells you there is potential there for 10-fold opportunities in the belt.

I think Reed Lake North points back towards the old Highway Zone. We talked about it as being a zone with no real economics, some economic mineralization, but no significant deposit being discovered, it having only a couple hundred thousand historical tonnes outlined. The interesting thing is that there is good alteration along that horizon, that’s where you’re going to pay particular attention to. Outlining targets within that horizon, coming back towards the old Highway Zone, is that feeding into something along that area, or was the Highway Zone a part of a larger feeder system, feeding into the Reed North system? That will be something that’s going to be tested out in time.

Rick: Excellent. You seem to be one of the more advanced exploration companies, at least in using the most modern exploration methods.

Neil: We’re fortunate to have Dr. Mark Fedikow as our Superintendent of Technical Services. Mark is one the worlds experts so that’s helped us with the geochem. We’ve flown all of our projects with VTEM. All of our EM surveys are interpreted by a consultant out of Denver, Colorado called Condor Consulting, that’s Ken Witherly and his crew. Top notch guys, experts in the EM field, they take care of all that for us.

On the ground we have used Dave Koop from Koop Geotechnical. They help us immensely with time-domain and borehole surveys, and we brought on guys like Kevin Ralph from Crone Geophysics, helping with the interpretation of our anomalies and bringing everything into Maxwell modeling. From geophysics to geology, as well as now integrating everything into ArcGIS, so everything is put into GIS format using ArcView.

We’ve incorporated all the historical work that’s gone on, so we’ve gone through all the historical logs, historical records, compiled all that data, brought in the new information, and utilized that. And then when we have something that’s interesting, something that looks like maybe a potential zone, we’re putting all that data also into Gemcom 3D software, we’re building our own solids and shapes. So yeah, we’re on the leading edge here with the technology, as well as the computerization end of it, for sure.

Rick: Well, what’s fascinating, is most of it is run in-house.

Neil: We do a large percentage of it in-house. Myself and the guys here, John Pattison, who’s our Chief Geologist, work quite extensively in GIS formats. We have our young guys being trained up as well. So a lot of our software work is all done in-house.

Our compilations are all completed in-house but we definitely have to go outside occasionally, then we bring in the people that we think are some of the better guys in the industry to assist us.

Rick: We’ve got quite a few properties, besides the ones already covered, and they all seem to have ongoing programs.

Neil: We’ve been out on Sails Lake drilling and had some very good, some encouraging results, 1.2 grams over 50 meters, .68 grams over 30 meters, some interesting intersections.

We completed a 3D IP over the area utilizing Matrix GeoTechnologies in-house software and that’s helped us with our modeling. With an IP done, we went back on the ground and trenched, did extensive trenching in places, mainly over the Long Zone, as well we went over to two new zones. New to us but they had old trenches on them, that was the East and the M Zone. We were over there opening up those trenches, doing some channel sampling and mapping trying to put all this information together.

The samples have gone in for analysis, we’re hoping that’s going to help us solve some of the structural complexities of the mineralization. I think Sail’s Lake is a good target for gold mineralization, it has arsenopyrite, that’s very similar to what you see in the historical New Britannia Mine, or the Snow Lake Mine, although they’re in basalts there and we’re in more of an intrusive-type rock.

At Morton Lake we’re just 500 meters away but on trend from the old Dickstone Mine site, which was a past producing copper-rich mine. We’ve done some drilling in there this year and completed three holes.

Although we didn’t get economic mineralization, we did come up with some very good alteration. Al Bailes, our structural/geological consultant on the property brought it to our attention that we were seeing some of the same silicification that we see in the footwall rocks of the old Dickstone mine in some of our drill holes, that’s quite intriguing. We still have some untested targets there so we’re going to be looking forward to testing them in 2012.

We just finished flying a large airborne survey over top of our Farwell block. Basically we’ve got unlimited drilling in Farwell and McClarty, that’s a fair size property, if anybody goes to the website and looks up our Farwell Property or McClarty Lake, they’ll see we have some fair size property holdings there. We finished that VTEM survey and just got the interpretations back from our consultants, now we’re going to start putting that data into GIS and start to compile that information in great detail, it’ll be ready for 2012 drilling.

We have our copper properties that we finished drilling on. There’s a little zinc intersection over there that we hit last year in holes 6 and 12. We have some good borehole pulse EM anomaly, so we’ll be chasing that stuff up. It has some interesting alteration associated with those holes as well.

As we move further to the west past Farwell and McClarty we’re into our Reed block. There we made the discovery at Cowan River. That was on our Reed MEL that we’ve changed the name to Cowan River, our 100% owned Cowan River. We made an interesting little discovery there of about 9% copper over a small intersection, but overall, we’re in six meters of 2% or 2.25% copper. This is a very interesting play, we drilled a few more holes, probed it, and have some good targets at depth. We have drilling plans for there in 2012 as well.

We’ve got a large grid going over top of the whole area, where these magnetic patterns, are around the Cowan River discovery. We’re going to do a 30 km deep EM time domain survey over top of that to see if we can pick out deeper targets, deeper than what the VTEM is able to see.

VTEM clearly can see anomalies down to around the 200 to 250 meter range. We’re trying to look deeper than that. We’re looking for around the 300 to 400 meter range. That survey is ongoing and should be completed prior to Christmas.

Rick: HudBay might be damn lucky they’ve got a relationship with you guys already in place.

Neil: We have a fairly good working relationship. I worked 13 years for HudBay and I still know most of the guys, so yeah, our working relationship is fairly strong. We talk back and forth on a weekly basis via emails or phone calls, and the working relationship goes back to their exploration team, as well as onto the mining side, it’s a good relationship.

Rick: Why should an investor seriously consider VMS for an investment?

Neil: Well, an investor should seriously consider VMS for the upside potential we have. We have 30% of, what I’ll say, is going to become a mine, touch wood here. We’re going to be mining out that Reed Copper deposit.

We have very good upside potential at Reed North, and the rest of the other joint ventures, other options. We have 100% owned ground surrounding all the stuff we just talked about. The main focus of HudBay is right now at the Reed Lake area. All our properties surround that area. We have excellent technical people. We have state-of-the-art technology being used, and we have a very large land position in a very prolific belt.

Rick: Thank you Neil, it’s been a pleasure.

Previous VMS Ventures articles by Richard Mills:

VMS Ventures – Success in Potential Elephant Country

VMS Ventures – Focused on Discovery

A Second Discovery At Reed Lake

Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com

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