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North West Zone Option

Northwest Zone Location and Description
The Northwest Zone Option property comprises a group of 5 mineral claims covering 899 hectares (2200 acres) located immediately east and north east of the JV Property and Reed Lake Deposit. The property is bounded on its south by a paved Provincial highway giving all season road access to exploration crews. The highway connects the property with the mining communities of Snow Lake (82 km to the east) and Flin Flon (100 km to the west). 

History of Exploration
Like the other properties in the area that comprise the Reed Lake JV-Option agreement the Northwest Zone is situated near the northern boundary of the flat-lying Paleozoic cover rocks. Underneath these Paleozoic-aged cover rocks are much older Proterozoic-aged volcanic rocks which are the host to the valuable mineral deposits being explored for by the Company. As such, the deposits are not exposed at surface and a great deal more geological detective work is required to locate them.

The property has undergone several phases of exploration including airborne and ground geophysical surveying, and some limited soil geochemical sampling. In addition there has been some prior drilling in which intervals of minor base and pathfinder minerals and hydrothermally altered volcanic rocks have been intersected.

These provide evidence of a favourable geological environment for the formation of a volcanogenic massive sulphide (VMS) deposit such as that discovered 1.5 km to the southeast at the Discovery Zone. Airborne and deep ground penetrating geophysical surveys provide geologists the ability to essential see through the 20 m thick layer of younger rocks which overlie the much older volcanic rocks that underlie the property. The geophysical surveys have also detected a number of highly conductive and magnetic anomalies which are the signature of base metal deposits in the area. These anomalies remain undrilled and will comprise priority targets in the upcoming exploration activities.

Geology
The property is located near at the northern limits of the Western Canada Sedimentary Basin, which are younger sedimentary rocks that overlie the older and prospective volcanic rocks being explored for copper-zinc-gold-silver poly-metallic deposits in the area. Most of the property is covered by this flat lying layer approximately 20 m thick and or glacial till all of which prevent geologists from directly seeing the rocks underneath. From drill core and correlation of known rock units to geophysical survey maps it is known that the same prospective rock package hosting the Reed deposit is present beneath these claims.

The geology of the Northwest Zone Option property consists of felsic and mafic volcanic rocks characteristic of the mine hosting areas in the Flin Flon – Snow Lake Greenstone Belt. The geology of the area is a continuation of the Four Mile Island Assemblage of rocks which host 2 past copper-zinc producers (Dickstone and Spruce Point Mines) and several deposits including the one discovered by the Company in 2007. The assemblage consists of mafic and felsic volcanic and intrusive rocks which are of the same age as those hosting the bulk of the VMS deposits in the Flin Flon domain.

Geophysics
VTEM Airborne geophysical surveys were flown over the property. In 2007 a survey flown in approximately a west to northwest direction and a second survey flown in a north south direction, was flown to better couple with the trend direction of the prospective target rocks was completed in 2008. In addition, deep penetrating Electro-magnetic surveying was completed in 2008 and 2009 over parts of the property and some historical and modern bore hole surveying was also completed which showed untested off hole anomalies to be followed up in future drill programs.

The geophysical surveys completed to date have provided both targets for drilling as well as a better understanding of the underlying geology and the direction that favourable host rocks are trending.

Deposit Types
Base metal massive sulphide mineralization hosted within a sequence of volcanic rocks and exhalite are strongly indicative of volcanogenic massive sulphide type base metal mineralization (“VMS”). This deposit type is representative of Flin Flon belt VMS deposits including the Discovery Zone at Reed Lake. This deposit-type remains a priority target for the Company in its surrounding properties.

Current Activities on the Property

The Company is no longer operator of the properties so future exploration and development activities will be undertaken by HudBay Minerals through its subsidiary and overseen by a joint management committee of representatives of the two companies.

HudBay initiated their exploration of the property with a variety of activities including data compilation and analysis, geophysical surveying and diamond drilling. On July 7, 2011 the Company announced HudBay completed exploration expenditures of $75,000 on the option property. This work included diamond drilling five (5) holes for a total of 1148 m and completing of borehole pulse electromagnetic surveys.

Under the terms of the agreement for the Northwest Zone claims, a further $125,000 must be spent in exploration activity before the anniversary date of July 5, 2012. This would make the total expenditures of $200,000 which is the required expenditure amount to meet by the end of year 2.

A review of all targets and results from the five diamond drill holes will drive the exploration program on this option.

Option Agreement with HudBay Minerals Inc.
On June 6, 2010 the Company announced the signing of a Joint Venture Agreement with a subsidiary of HudBay Minerals Inc. Pursuant to the Joint Venture Agreement, HudBay has a 70% interest and VMS has a 30% interest in a joint venture respecting the Reed Lake property and the two claims immediately to the south. The JV area includes the Reed Lake Discovery Zone mineral deposit.  HudBay will act as operator of the joint venture with authority and discretion as to the exploration and potential development of the property and will have exclusive rights to purchase and market the ore produced from the property.

HudBay will also provide full financing for VMS' proportionate share of the costs to develop the property, which will be repayable solely from VMS' share of cash flow generated by the Project. Upon VMS making certain filings to confirm the previously-disputed boundaries of the joint venture claims, HudBay will make a cash payment to VMS of $2.6 million, as consideration for VMS transferring the southern claims to the joint venture and in lieu of HudBay's obligation to earn back into the property under the initial option agreement between the parties.

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