Dear VMS followers,

I’m writing to respond to two issues, or misconceptions, some shareholders had regarding yesterday’s release. I hope I can put to rest concerns about both.

1. “Do these drill results mean the mine won’t go ahead?”

I thank one of our largest shareholders for calling early this morning and discussing the release and the reactions some in his network of investors had to the release and their concerns about the viability of the Reed mine project, itself.

None of the drilling announced yesterday targeted the deposit itself, and so, has no bearing on the size or grade of Reed, or Hudbay’s plans to mine the Reed copper deposit starting next year.

The drilling at Reed we announced yesterday was designed to test for additional tonnage. We have a strong anomaly suggesting the copper rich Zone 10 lense of the deposit goes deeper. We were looking for that “down plunge extent of the copper rich Zone 10 at Reed”, as reported yesterday.

Unfortunately, the ice melted and the drill was stopped on its way to test below the Reed deposit. The 1,000m hole was stopped 500m from its target. We are still hopeful that Zone 10 extends into the 500m to 800m area below the known deposit and will look to test the same anomaly next winter, ahead of mine production.

In summary, yesterday’s release has no impact, whatsoever, on the announced mine plans for the high grade Reed copper deposit.

2. “What percentage of the Reed development will VMS be on the hook for?”

As I replied to this today “Our 30% share of the capital costs (30% of approximately $75M) is approximately $22.5M. That will come out of early revenue from the mine. Present projections suggest that payback of the $75M will be complete within the first year of production.  After that, we expect cash flow to VMS for the remainder on the mine life (5 to 6 years). Our calculations, at these copper prices, suggest approximately $100M to VMS over the mine life.” We are carried to production.

This slide from our most recent Corporate Presentation describes our internal calculations using the January, 2012 PEA numbers and provides perspective on Reed’s value to VMS shareholders, based on copper prices as shown. 

While exploration results yesterday were disappointing, our primary asset remains on track to deliver tremendous value to the Company.

I do appreciate your calls and thank you for the feedback.