VMS Ventures, HudBay Minerals sign LOI for Reed Lake JV
2010-03-04 08:42 ET - News Release
Mr. Rick Mark reports
VMS VENTURES ENTERS INTO LETTER OF INTENT WITH HUDBAY MINERALS TO DEVELOP ITS REED LAKE DISCOVERY AND REED LAKE PROPERTIES
VMS Ventures Inc. has entered into a non-binding letter of intent with a subsidiary of HudBay Minerals Inc. respecting VMS's Reed Lake discovery zone, the copper-rich Reed Lake property claims optioned from HudBay, the two southern claims adjoining the Reed Lake property and certain exploration properties adjacent to the Reed Lake property, which are 100 per cent held by VMS. These Reed Lake properties are all located in Manitoba's Snow Lake-Flin Flon greenstone belt.
The letter of intent contemplates that the parties will enter into a definitive joint venture agreement respecting the two Reed Lake property claims and the two claims immediately south of the Reed Lake property. HudBay will have a 70-per-cent interest in the joint venture and VMS will have a 30-per-cent interest. Upon execution of the definitive joint venture agreement, HudBay will make certain cash payments to VMS in satisfaction of its obligation to earn back into the property and as consideration for VMS transferring the southern claims to the joint venture. In turn, VMS agrees to abandon all disputes respecting the location of the boundary between the Reed Lake property and the southern claims.
Under the joint venture, HudBay will act as the operator, with primary 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 new joint venture. HudBay will provide full financing for VMS's proportionate share of the costs to develop the property, which will be repayable solely from VMS's share of cash flow generated by the project.
The letter of intent also provides that, concurrently with the entering into of the joint venture agreement, VMS and HudBay will enter into an option agreement that grants HudBay the option to earn a 70-per-cent interest in four adjacent properties held by VMS, including the Tower zone and Super zone properties. Upon making certain cash payments and meeting work commitments over two to three years with respect to each property, HudBay will earn a 70-per-cent interest in the applicable property, resulting in a new joint venture between VMS and HudBay on substantially 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 will result in such property reverting to 100-per-cent ownership by VMS, but will not affect HudBay's option over the other properties.
Rick Mark, chief executive officer and chair of VMS Ventures, states: "We are very pleased to enter into this letter of intent with HudBay Minerals. We believe HudBay is our best partner to develop the Reed Lake deposit quickly and profitably. We look forward to assisting HudBay in resuming drilling at the Reed Lake deposit, and aggressively exploring and developing the joint venture claims. We welcome their commitment to explore for more deposits in the Super zone and the other properties surrounding the Reed Lake joint venture claims."
The establishment of the joint venture and option arrangements is contingent on the parties reaching mutually satisfactory definitive agreements as well as on receiving all necessary corporate and third party approvals. HudBay and VMS anticipate that definitive agreements will be completed by May 31, 2010.
We seek Safe Harbor.
