The Conversation (0)
John Roozendaal, president and director of VMS Ventures, spoke with Copper Investing News about Reed Copper, the company’s joint venture project with Hudbay Minerals.
Copper prices have been seeing red lately as fears of a slowdown in China and a strong greenback weigh heavy on prices. With a lackluster short-term price landscape, it can be difficult to spot the positive factors at play in the market.
This week, John Roozendaal, president and director of VMS Ventures (TSXV:VMS,OTC:VMSTF), spoke with Copper Investing News about Reed Copper, the company’s joint venture project with Hudbay Minerals (TSX:HBM,NYSE:HBM). Reed Copper is located in the world-class Flin Flon-Snow Lake copper belt in Manitoba, and the companies aim to start production there by Q4 2013. The project hosts an indicated resource of 2.5 million tonnes of copper at 4.52 percent.
CIN: John, before we dive into a look at Reed Copper, I was hoping you could give our audience some insight on what is happening with copper lately. Where do you think the market is headed?
John Roozendaal: There are two primary forces at work when it comes to copper price. At present you have uncertainty about the growing economies, particularly China, which have resulted in the economy boom in the last decade. This has since led to a concern that there will be a drop in demand for base metals as these economies slow down with the fear being that we will see a drop in the metal price.
The second thing— and this affects everyone across the board— is the value of the US dollar. One of the things that has been going on along with the fear of economies, is that people are worried that the value of their currency (in whatever country they live in outside of the United States), is going to drop relative to other currencies. Ideally, you want to put your money into places where it is going to do well and the US dollar is always a safe haven. So money has been flowing into the US dollar and that raises the value of the dollar against other currencies. The problem with that is that for all commodities (coffee, gasoline, and copper, for example) are priced in US dollars. So as the price of the US dollar climbs, so to does the cost of commodities. The cost of commodities then is rising, and when that happens, demand drops.
Where is it all headed? Well, good question. One side of that is people need the metal and are willing to pay for it and the other side is where are you going to get it from, and that’s the business that we’re in, which is providing these metals and trying to find them. The thing is that the cost to mine these metals is rising all the time. So in order to continue to put metals out to the market, we have to keep the price of the metal rising so that companies don’t close their mines resulting in shortages.
Right now the fear about the drop in demand is greater than the fear that there won’t be enough metal. But these things correct themselves overtime, and in the long term, I’m very bullish about where copper is going.
The future I think is very bright for metal prices, it’s just the short term fluctuations that are causing some uncertainty.
CIN: As a little bit of a background, can you tell us a little more about mineral exploration in Manitoba, particularly copper?
JR: There’s two world class camps in Manitoba, one produces copper as a primary product and that’s the Flin Flon-Snow Lake belt, where our discovery was made. The second camp is a world class nickel belt called Thompson, and exploration there was was primarily for nickel, but it hosts a percent or half a percent of copper, so it’s actually quite a considerable producer of copper in its own right.
But the real major copper producer would be the Flin Flon belt, which is considered to be one of the richest belts of its kind in the world. The average deposit of all the deposits found in the belt average about 2.5% copper per tonne, and 4% zinc per tonne, and about 2 grams of gold and an ounce of silver.
As one broker used to say, these are real jewel boxes. So when you find a deposit here, you have a lot of metal packed into a small space. Which is great.
CIN: The Reed Copper deposit is a 30/70 joint venture agreement with Hudbay Minerals. The project is aiming for a production start as early as year end (full expected in Q2 2014). Can you tell us how the development is progressing?
JR: Thankfully development is going very well. Though this is the first time that HudBay or anyone has built what they call a ramp-type mine under this part of the Flin Flon belt, so the rocks are new and they have to overcome certain challenges along the way. But the team there has been just excellent and they have overcome any difficulties in fairly quick order.
The first thing is always safety in mining, and as of the end of last month we had 443 consecutive days without a loss-of-time accident and we are really proud of that. The rate of the ramp slowed a little bit in February-March as we ran into some poor ground conditions— poor rock conditions — but as I mentioned the team overcame that fairly quickly, and we are back on developing underground at the rate that we’d planned on again. We stepped back a little bit but not very much. This will mean that we probably have to adjust our plans to 45,000 tonnes of mining this year instead of 50,000, but that’s not a big impact.
What’s most important, however, is that we remain on budget. Right now the budget for the whole complex is about $72 million and we are on track for that this year.
Everything is going at as good a pace as we could have hoped. We’ve been building this mine for over a year; and all the major surface installations are complete and all the mobilization and mining equipment have now reached the site. We are basically ready to go once the mine gets deep enough for continuous extraction.
CIN: Not to go off on a tangent, but could you explain a little bit about the “ramp” style mine?
JR: As you know, there are several different ways of getting rock out of the ground to the surface. One of the ways are giant open pits, another way is if you mine from the surface but you are moving a large amount of rock and then you are left with a pretty big hole. And then another way is if your mine is very deep, in which case you want to drill down a shaft — a vertical shaft, like a giant elevator —that takes people and equipment down and ore and people back up. It’s a shaft development, which can be a little expensive, but that’s how you get to deeper deposits.
In this case, we have the best of both worlds. We have a deposit that’s not particularly deep — very high grade comes near surface — but instead of having to build a giant hole to get to it we can basically just mine in a tunnel to get to it, going down at a 15% grade. At the surface all you will see is a large portal entrance and the majority of the mine is invisible from the surface. With this method you can mine down to about a half kilometer from the surface. It also allows you to use real tracked vehicles, trucks that can drive up and down and move equipment versus having to take stuff down the shaft or have these giant mine trucks that cost millions of dollars. It’s a very interesting way of mining and I think we will be quite profitable because it doesn’t cost a whole lot to get to it or to mine it and yet you are mining a whole lot of metal.
CIN: That’s great. What is left to do before production starts?
JR: What we call our “Critical Pathway to Production” remains is that ramp development. To reach full production we have to have the ramp down to about half the entire depth of the planned mine which is about 260 meters from the surface. We expect to reach that by Q2 of 2014. But we will be deep enough that we can develop headings on each ramp. So at each level of the mine we will have different tunnels going into where the ore is. You need to have enough of those in order to allow continuous mining so that while one area is being blasted, another area is being drilled, and another area is being mucked out meanwhile the ore being taken out. So you want to have a number of those levels up and operating. We don’t think that we will be ready until about Q4 of this year.
CIN: I read on Mining and Exploration that the footprint of Reed is very minimal. Can you tell us more about what this means and how it is being achieved?
JR: You know, it’s a function of the way nature positioned the deposit that’s a big part of it. And frankly it’s the attitude that Hudbay takes and that we take with what we are doing. We don’t want to have a long term impact on the land and want to have the smallest footprint. We’ve gone above and beyond and probably spent more than you might have in other places of the world, but this is our home and we want it to be clean and a great place to be after we’re done mining.
And Canada has really strong regulations on mining. That’s why if you’re pro-environment, you should be pro-mining in Canada because we actually care about what companies do here.
Anyway, at Reed Lake, what we are able to do because the actual minerals start about 20 meters from surface, there is a nice big gap of rock on top. All of our mining is going to happen underground, you won’t see the mining from surface and all the ore that we bring up will basically be ore that we will bring out the the Flin Flon facility which already exists, and it will be processed there, or it will go back underground after. There isn’t going to be a giant pile of waste laying around.
Secondarily, all the camp and equipment that we have will be all portable stuff; that you can hook up to a truck and pull away, or you take apart and dismantle then we reseed the ground with trees and grass and the forest will take it back over again. The fact that we are using that ramp method as opposed to a giant pit gives us the ability to do that.
CIN: So you will just seal off the ramp?
JR: All we do is cement off the top of it, and since we back fill everything as we mine it, so exactly, we just seal it off for safety reasons. That’s the end of it. We are talking about 7 hectares —the size of a small mall— it’s going to produce full-time.
Mining is the highest paying sector of the Canadian economy. and it’s the second largest source of income of the Manitoba government. There are hospitals, schools and pensions that are going to be paid for by this low impact surface. So it’s a pretty amazing return for our society.
CIN: With Hudbay being the operator of the Reed Copper project, what role does VMS occupy?
JR: We have a 30 percent ownership in the deposit and the project. We do have a management committee, and we do participate. Its our biggest asset, so we keep an eye on the development. We have technical expertise as well, particularly on the exploration side of things.
The mining itself, Hudbay is the leader in that part of the world; they are great at it. Our chief operating officer, Neil Richardson worked with HudBay for 13 years in their mines and at surface. So we have a really good relationship with them and we have other specialists — engineers — that we bring in that will help guide us. But primarily, we maintain the development, participating in the meetings to make sure things are happening, and following along with the story. Frankly at the end of the day, we will be sharing the profits.
CIN: What other regions in Manitoba is the company looking at for exploration?
JR: We are focused in that Flin Flon belt. We’ve had projects there for 7 years now and we are going to continue doing that for the foreseeable future. We are exploring. We drilled 20 drill holes this winter testing various targets in that area. Every year we simply refine our targeting, we use other tools to come up with new targets and we go test those.
Another way that we participate with HudBay is helping them along with the exploration side. They already operate on the exploration side, but we have expertise on our side of it. We were the ones who made the discovery at Reed Creek. We’ve got some expertise to lend to the process.
Primarily our work is going to be two-fold for the company. One is going to be exploring that area to try and find more deposits, that hopefully can feed the existing infrastructure, or start a whole new mining complex. Secondarily, we will look for new opportunities for the company to grow on and that takes a lot of time to find and have our technical team review them.
In this bad market that we are in there are actually a lot of good opportunities.
CIN: Well thank you very much for giving us some insight on what’s going on with VMS.
JR: Thank you.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.
Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of INN and do not constitute investment advice. All readers are encouraged to perform their own due diligence.