₪ David Pescod's Late Edition October 22, 2007
VMS VENTURES (V-VMS) $1.44 -0.06
They won’t be confused as being “booth babes” but obviously their booth at the mining convention this weekend created an awful lot of traffic and attention. Joe Martin’s Cambridge House mining show in Toronto had 4700 delegates registered to attend with 250 companies and it seemed that almost all of them were lined up at the VMS Ventures booth. But then, that’s one of the two mining stories of the day with their discovery at Reed Lake.
When we visited with John Roozendaal, the company President, he tells us that it had been the plan for many years by both him and Dr. George Gale (who had for 29 years been in a senior position with the Manitoba government mining office) to one day get together and try and put a mining company together. VMS has been the result of their many years of work and it looks like they are off to one heck of a strong target.
Yesterday was a great day as Rick Mark joked. “we are off in a limo to catch a jet to go to New York where there are a couple of guys on Wall Street who want to suddenly talk to us and then we catch a limo to catch a jet to get back to Toronto where some of the Bay Street boys want to talk to us.
We joke because a year ago, we couldn’t have afforded taxi fares and now all of a sudden, everyone wants to talk to us.” It is becoming quite a story. The lads from Manitoba are in big demand in the eastern Cities.
And how does Mark enjoy his new role? The former school principal is now the major face for the company, but where did he get the promotional genes? He tells us that his mother was once involved in oil and gas promotion, involved with a stock that once hit $25...but unfortunately missed.
The VMS story should have new maps out on their website very shortly and the first thing that’s going to stand out is the mining activity in the area. Company officials tell us that if you take a line and draw in on the map, on the left side halfway between Cranberry, Portage and Wanless, and move it over to Wekusko, it’s an interesting map because just in that area to the north of that line, there is something like 21 producing and former producing mines. Below that line though, there’s only four discoveries, one of which is currently producing. Why the interest down there? Well, they suggest that limestone covers much of whatever may be underneath that area of the world and with new technology, they hope something is found underneath it using that new technology.
In the meantime their theory is that there is a significant northeast to southwest trend where they have many large pieces of land to be exploring over the next year and now have a rig tied up for the next year to make sure the drilling gets done.
In a way, their Reed project discovery was a total accident. It was right beside the road (just 100 metres off) and had some elevation to it. This is an area of the world that is one vast bog/swamp land and work simply doesn’t get done in the summertime. In the wintertime, with freeze-up, it’s a hive of activity so we suspect we are not too far away from busy times—not just for VMS, but for many players in the area. That new map on their website when it comes out is a must-see, both showing the trends and also the activity in the area. It also shows where the massive Hudson Bay facilities are and or course the smelter and related facilities in Flin Flon.
It brings home the fact that Canaccord’s Wendell Zerb makes, “it wouldn’t take too big a discovery for VMS to become commercial because there is so much infrastructure in the area versus a Noront, which is way out there in the middle of no where.
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VMS Ventures has a rather aggressive drilling program ahead of itself on its Reed Lake discovery zone in Snow Lake area of Manitoba and in this area of the world folks, mining adds a lot to local communities and has a long and storied history in the area. If you are into mining and find something, there are lots of facilities and infrastructure all around you. The setting is great.
But if you’ve got an aggressive drilling program, one thing you need is money and on October 18th, VMS announced they are doing a $19.5 million private placement. Private placements are one way to rather quickly and efficiently raise a whole bunch of money. Usually, purchasers of placements get a discount to what it has been trading at and they also get a warrant or a half a warrant as a bit of a bonus, so in case the programs are successful they’ve got a nice pay day. Once again, if the program is successful. The bad part about being part of a placement of course is that you are locked-in for four months. Over the next few months the stock could soar or it could fall right out of bed and there is still nothing you can do about it.
You are locked-in for four months.
Imagine how a lot of those holding private placements three, four and five months ago felt with the recent swoon we’ve seen in mining stocks when many dropped 50% and some more. Once again, you are locked-in. Sure, some people can use fancy techniques such as shorting, but sometimes those can go horribly wrong as well.
To qualify to be one of these people to buy private placement, there are several different ways to qualify, but the most common is to simply show that you have assets of $1 million or more. Which unfortunately, cancels out more than a few people.
Which gets us back to the private placement that VMS did just about four months ago when they did private placements and the lucky folks that bought in at that financing, paid $0.22 a share and the flow-through folks paid $0.25 a share. Plus of course, the warrants. Many of those good folks today probably feel as if they’ve won the lottery...which brings up the other trick. You are locked into a four-month hold which many of these folks are most likely looking to take a good chunk of profits (don’t you think?) after all, they are looking at five and seven-baggers and by the end of the month, that means almost 10 million shares will become free-trading.
That might well put some selling pressure onto the stock, don’t you think? Unless of course, there’s more drilling results that get people excited again.
Meanwhile, Rick Mark, the CEO and Chairman who is having a lot of fun these days confirms to us that with the recent financing, they will now have up to 120 million shares outstanding fully-diluted.
If the people who took the PP from four months ago decide to cash in their chips, it could cause some downward pressure on the stock. On the other hand, if they get greedy...
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