Neo Performance Materials inks deal to acquire Hudson Resources’ rare earths project in Greenland

Neo Performance Materials (TSX: NEO) will acquire an exploration licence from Hudson Resources (TSXV: HUD) for its Sarfartoq Carbonatite Complex in southwest Greenland, under a binding agreement announced Monday.  
 
The licence will cover Sarfartoq, which hosts Hudson’s ST1 rare earths project and the Nukittooq niobium-tantalum project, Neo, a Toronto-based metals manufacturer said in a news release. 
 
Both of Hudson’s projects have a “high ratio” of neodymium and praseodymium at 25%-40% total rare earth oxides that comprise an NI 43 101-compliant resource of 27 million kg of neodymium oxide and 8 million kilograms of praseodymium oxide, according to its preliminary economic assessment published in 2011. 

A drill shed at the ST1 Zone, Hudson’s rare earths project where Neo Performance Materials will explore and develop rare earth oxides. Hudson Resources image

That study outlined an inferred open pit resource of 14.1 million tonnes grading 1.51% total rare earth oxides in the ST1 Zone, using a 0.8% cut-off grade, and 40.6 million kilograms of neodymium oxide. 
 
About 3 km east of STI is the ST40 high grade zone that hosts a 45% ratio of neodymium oxide to total rare earth oxide, which Neo calls “one of the rare earth industry’s highest-known ratios.” 
 
Neo’s president and CEO, Constantine Karayannopoulos said the company believes Sarfartoq is a strategic asset that complements its European rare earth magnet growth strategy. 
 
“This resource would supplement our current supply of rare earth concentrate from Energy Fuels in the United States. We are very confident and supportive of the Greenlandic government’s vision for sustainable-focused mining as the driver of their economic development, job creation, and growth,” he said. 

The company has a supply agreement with Energy Fuels (TSX: EFR; NYSE: UUUU) where the Colorado-based producer of uranium, vanadium and rare earths provides Neo with mixed rare earth carbonate produced at its White Mesa Mill in Utah, which was initially mined as monazite sand ore in Georgia by Chemours (NYSE: CC). 
 
Under the terms of the agreement, Neo will form a special purpose entity to explore and develop Sarfartoq, an important element of its “magnets-to-mine” vertical integration strategy. 
 
The development of Sarfartoq is part of Neo’s aim to diversify rare earth sources and expand supply chains that feed the company’s rare earth separation facility in Estonia. 
 
It also plans to build a rare earth permanent magnet manufacturing facility in that Baltic country to provide European manufacturers with magnets for electric and hybrid vehicles, wind turbines and energy-saving electric motors and pumps. 
 
Neo and its new entity hope to move the project towards eventual commercial production, with a possible offtake agreement with the entity to buy 60% of the mineral concentrate produced there. 
 
For the licence, Neo will pay Hudson a non-refundable cash sum of US$250,000 once the agreement is signed and another $3.2 million once the transaction closes. 

Hudson CEO Jim Cambon said in an email to The Northern Miner that ownership of the project would be transferred to Neo, and that Hudson would retain 5% of the future entity. 
 
The agreement is subject to approval from the government of Greenland and the TSX Venture Exchange. Transfer of the licence to Neo is expected to take about six months. 
 
Cambon said in the news release that the company is very pleased to sign the deal with Neo as the world faces “critical shortages” of rare earths outside of China.  

“This deal provides a significant cash injection to the company and importantly, also gives Hudson shareholders potential significant upside in the future value of the Sarfartoq projects through equity or additional consideration.” 
 
Neo shares were trading $13.58 as of mid-afternoon Monday in Toronto. Its shares have traded in a 52-week window of $10.48 and $22.85, giving it a market cap of $552 million. 
 
Hudson’s equity was trading at 5¢. Its shares have traded in a 52-week window of 0.03¢ and 14¢. It has a market cap of $9.8 million.