Dear VMS Shareholders,
On February 25, 2015, we published an operations update for the month of January at Reed mine. On Tuesday, February 24, 2015 the VMS technical team toured the Reed mine to get a first glimpse of Zone 10, and our deepest look to date at Zone 20. While at the mine, representatives from both VMS and HudBay attended the quarterly management meeting to discuss last quarter’s results, and the current operations and achievements.
As our COO Neil Richardson stated in last week’s press release, “Expectations were exceeded for production and development metres in the month of January. We have intersected ore on the 210 metre level from both Zone 20 and Zone 10. High copper grades are anticipated as we continue to develop new working faces within Zone 10.”
Our observations of the ore during the tour support Neil’s statement. Mining started on Zone 30, which is closest to surface and estimated to have grades of about 2% copper and 2.5% zinc, with some additional gold credits. Most of the mining to date has been from this lower grade zone. Our original resource model estimates that the two deeper and larger zones average closer to grades of approximately 4% copper, without as much in other credits. The greater copper content is more significant from an economic standpoint. (see News Release April 2, 2012)
The 100 day lag time between extraction and the receipt of payment for ore, means that the reporting is deferred by a quarter. We know that the mine is creating revenue which is being used to pay down our contribution loan for the construction of the mine.
As stated in Note 12 C of our financial statement published November 30th, 2014, we have estimated that the loan will be paid down by $4.5 million dollars. The estimated revenue which was generated came from mining ore that was closer to 2% copper rather than 3%- 4%, which is what is anticipated as mining begins in the higher grade zones.
The lower copper price will have an effect on revenue but because the commodity is sold in US Dollars, the favourable exchange rate to the Canadian Dollar helps offset the reduction in the price of copper.
With respect to the VMS Ventures share price, I encourage you to consider what the charts below demonstrate. Although the share price of VMS has remained relatively flat, the TSX-V has collapsed by almost 50% in value and there has been a sharp decline in the price of copper.
VMS Share Price
The VMS team is always looking for great projects that will continue the growth trajectory of our company. The projects we favor have high upside potential and limited expenditures. There are tremendous opportunities available and we believe our patience has been rewarded with the Assean Lake Gold acquisition.
Assean Lake Gold Property, Manitoba
We recently signed LOI’s with two JV partners to acquire a 100% interest in the Assean Lake Gold Property. (see News release of February 16, 2015) Our team is very familiar with the property, and have been eager to go back and continue exploring it. This acquisition will again put the property under a single operator with a proven track record in Manitoba.
Historically, the first gold discoveries on the property date back to the 1930s. At that time, prospectors were unable to explore beyond the minor rock outcroppings along the lakeshore, due to the blanket of soil and clay, several metres thick covering the property which made traditional prospecting ineffective.
Limited exploration for gold in the area took place until 2001, when modern prospecting techniques were employed on the property. Several completely “blind” discoveries were made by utilizing a ‘state of the art’ geochemical prospecting method brought to Canada from Australia by our own Dr. Mark Fedikow which he tested on this property.
A “blind” discovery is one where a mineral deposit is discovered despite being buried beneath a layer of rock or soil. In the situation where evidence of a mineralizing system is not available, tools are needed to “see through” the rock and soil to find the deposit. Assean Lake’s Hunt Zone was the first experience for some of our team, with making a “blind” discovery but not our last. Our Reed mine copper deposit was also a buried deposit with no physical exposure at surface, being buried under 25 metres of younger, un-mineralized rock.
At Assean Lake, a combination of modern geochemical soil sampling surveys and a variety of geophysical tools will aid in the identification of new targets, along with our geological understanding of the area. There are several styles of gold mineralization known to occur on the property. Shear zone hosted gold at the Hunt Zone, Banded Iron Formation hosted gold at the BIF Zone, and Tungsten-Bismuth Associated gold at the Blow Fish Lake Zone. There have been significant gold deposits of each deposit style elsewhere on the Canadian Shield and around the world and we believe the same potential exists at Assean Lake.
In the coming weeks and months, we will be combing through the large database, which includes over 200 drill holes, of which 184 were drilled between 2001 and 2005, along with various geochemical and geophysical surveys. Nearly $5 million was spent on the 28,000+ metres of drilling completed in the nine large programs over those 5 years. Highlights from the drilling on the most significant discovery, the Hunt Zone, include: 8.7 m grading 5.48 g/t Au; 7.1 m of 8.19 g/t Au; 8.15 of 9.17 g/t Au; plus higher grade intervals such as 4.27 m of 27.22 g/t Au; 2.95 m of 16.96 g/t Au and 2.35 m of 27.91 g/t Au. (Geological Report on the Assean Lake Gold Property June 20, 2005 J.E. Christoffersen B.Sc., P.Eng) It is worth noting that during the time when this drilling was taking place, the spot price of gold was trading below $450 USD.
By the time drilling was finished, the Hunt Zone was traced from near surface, to a depth of 250 metres (where it was dislocated by a fault structure) and stretched over a strike length of 600 metres reaching over 10m in width in places. In addition to the Hunt Gold zone, several other “blind” gold discoveries were also made on the property and we believe there are more to be found, as much of the property remains untested. Though our focus will be on continued exploration of gold mineralization, we will be investigating nickel
sulphide and sedimentary hosted zinc mineralization, which have also been indicated by historical drilling on the property.
The Property is large and covers a 20 km length of a major crustal break called the Assean Lake Shear Zone. It is along major, deep tapping structures such as this that some of the most important gold camps on the Canadian Shield are found. The property is located approximately 120 km NE of the mining city of Thompson, Manitoba, along an all season provincial highway connecting Thompson and the major hydroelectric generation stations at Gillam, Manitoba.
We are excited for the challenges and opportunities that 2015 will bring and I encourage you to contact us with any questions or comments. Your opinions, observations and suggestions are important to us.
John Roozendaal B.Sc.
President & CEO
VMS Ventures Inc
500-200 W. Esplanade
North Vancouver, B.C.
Fax: (604) 986-2021
Toll Free- 1-866-816-0118