VMS Ventures Inc.: Reed Copper Project Positive Pre-Feasibility Study Completed

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VANCOUVER, BRITISH COLUMBIA--(Marketwire -04/02/12)- VMS Ventures Inc. (TSX-V: VMS.V - News) ("VMS" or the "Company") is pleased to announce that Hudbay Minerals Inc. (TSX: HBM.TO - News)(NYSE: HBM - News) ("Hudbay") has informed the Company that a NI 43-101 pre-feasibility study completed by Hudbay and Stantec Consulting Ltd. (North Bay, Ontario) outlined positive economics for the Reed Copper project. VMS owns 30% of the Reed Copper project joint venture, which is operated by Hudbay and is located 120 km from Flin Flon, Manitoba. According to Hudbay, first production is expected by Q3 - 2013.

 

Reed Copper Deposit Mineral Reserves(1) - March 30, 2012
Category         Tonnes      Au (g/t)     Ag (g/t)       Cu (%)       Zn (%)
Probable      2,157,000         0.48         6.02         3.83         0.59
(1) Shown as 100% of the mineral reserves; VMS has a 30% interest in the
    Reed Copper project joint venture.

VMS Ventures CEO, Rick Mark, remarked: "We are pleased with the results of the pre-feasibility study and how closely it compares to the PEA completed in December 2011. This demonstrates the robust nature of the Reed deposit. First production in Q3 - 2013 is good news for VMS shareholders. We will continue to add value to the project by evaluating trade-off studies, not included in the pre-feasibility, with Hudbay's mining team and remain optimistic about adding tonnage down dip at Reed. For those bullish on the copper price in 2014, and beyond, the cash flow projections are most encouraging."

A summary of the project's economic assessment follows (100% basis):

 

--  Initial production at Reed is expected by Q3 - 2013 and will ramp up to
    full production of approximately 1,300 tonnes per day by Q1 - 2014.
--  Average expected reserve ore grades of 3.83% copper, 0.48 g/t gold and
    6.02 g/t silver, slightly better than PEA due to the exclusion of the
    inferred resources in the pre-feasibility study.
--  Assumed metal recoveries in Hudbay's Flin Flon Concentrator of 94%
    copper, 58% gold and 62% silver.
--  Average production in concentrate of approximately 17,000 tonnes per
    year of copper metal.
--  Total operating costs estimated to average approximately $90 per tonne
    milled ($67 per tonne mining, $16 per tonne milling and $7 per tonne
    administration) over a five year mine life.
--  Sustaining capital expenditures are expected to total approximately $52
    million over the five year mine life.
--  Pre-Feasibility pre-tax NPV (8%) of $57.4 million using weighted average
    metal prices of US$2.95/lb. for copper, US$1,269.09/oz. for gold and
    US$24.78/oz. for silver.

The comparison of the pre-feasibility and the PEA value is shown below, these changes mainly reflect the 170,000 tonnes of inferred resources that were not included in this study.

 

---------------------------------------------------------------------------
                Pre-Feasibility
                          Value      PEA Value     Difference    Difference
                      (CDN$000s)     (CDN$000s)     (CDN$000s)            %
---------------------------------------------------------------------------
Tonnes Milled         2,157,376      2,380,167       -222,791         -9.4%
---------------------------------------------------------------------------
NSR                    $423,212       $458,506       ($35,294)        -7.7%
---------------------------------------------------------------------------
Royalty                   ($178)         ($197)           $19         -9.5%
---------------------------------------------------------------------------
Net Revenue            $423,033       $458,309       ($35,276)        -7.7%
Operating Costs:
Mining                 $143,891       $161,199       ($17,308)       -10.7%
Milling                 $34,022        $37,535        ($3,513)        -9.4%
Overhead                $16,030        $18,899        ($2,869)       -15.2%
---------------------------------------------------------------------------
Total Operating        $193,943       $217,633       ($23,690)       -10.9%
---------------------------------------------------------------------------
Operating Margin       $229,090       $240,676       ($11,586)        -4.8%
Initial Capital        ($71,910)      ($70,633)       ($1,277)         1.8%
Sustaining Capital     ($52,350)      ($55,355)        $3,005         -5.4%
Closure                 ($2,405)       ($2,405)            $0          0.0%
---------------------------------------------------------------------------
Pre-Tax Cash Flow      $102,426       $112,283        ($9,857)        -8.8%
NPV8                    $57,443        $64,917        ($7,474)       -11.5%
IRR                       34.7%          36.7%
---------------------------------------------------------------------------

The pre-feasibility study prepared by Hudbay and Stantec in respect of the Reed deposit demonstrates that the indicated resources can be converted to reserves and economically viable for extraction by long-hole open stoping at a rate of 1300 TPD.

Reed Copper Project Assumptions and Qualifications

Production at Reed is scheduled to begin at the 260 metre level from Zones 10 and 20 and in Zone 30 from the 135 metre level. Mining is expected to finish in Zone 30 from the 85 metre level, in Zone 20 from the 110 metre level and in Zone 10 on the 285 metre level.

Run of mine ore will be transported by truck directly to Flin Flon where it will be crushed to less than 150 millimeters. The Reed ore will be batched independently through the Flin Flon concentrator with assumed metal recoveries of 94% copper, 58% gold and 62% silver producing a copper concentrate.

Access to the underground mineral resources will be via a trench, portal and decline located near the center of the surface site. The decline will be excavated 6 metres wide and 5 metres high to a depth of 510 metres from surface and be able to accommodate a 60 tonne truck. Ore and development waste will be hauled to surface via the decline. Each mining level, spaced 25 metres vertically, will be accessed from the decline and will be 5.5 metres wide by 4.5 metres high to accommodate a 10 yard load, haul and dump scooptram.

The project will be powered by diesel generators and power distributed to surface buildings and underground.

Stantec provided capital estimates for: surface infrastructure, underground dewatering, indirect costs (contractor, construction management). Hudbay provided capital estimates for underground development and construction, mine equipment, all other indirect costs, operating costs, sustaining capital, production schedule and metal price forecast.

Proposed Construction schedule: March 2012 - site clearing of portal area, April 2012 - Portal grouting, June 2012 - Excavation of trench, August 2012 - start underground development, Jan 2014 - project complete.

Qualified Person

Neil W. Richardson, P.Geo., Chief Operating Officer of VMS Ventures Inc., a Qualified Person in accordance of Canadian Regulatory requirements as set out in NI 43-101, is responsible for the information in this release.

About VMS Ventures Inc.

VMS Ventures Inc. is focused primarily on acquiring, exploring and developing copper-zinc-gold-silver massive sulphide deposits in the Flin Flon-Snow Lake VMS Belt of Manitoba. The Company's VMS project property portfolio consists of the Reed Lake Project, Copper Project, McClarty Lake Project, Sails Lake Project, Puella Bay Project and Morton Lake Project. Outside of the Snow Lake camp, the Company holds massive sulphide prospective properties near the past producing Fox Lake and Ruttan copper-zinc mines, near the communities of Lynn Lake and Leaf Rapids in northern Manitoba. These properties are located in the mining friendly province of Manitoba, Canada. The Company also has optioned three properties in the Sudbury mining camp. They are Terra Incognita, Golden Pine and Black Creek.

ON BEHALF OF THE BOARD OF DIRECTORS

John Roozendaal, President

VMS Ventures Inc.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.