(Kitco News) - Hudson Resources (TSX-V: HUD) announced today that the company and Neo Performance Materials (TSX: NEO.TO) have executed a binding agreement whereby Neo will acquire from Hudson an exploration license covering the Sarfartoq Carbonatite Complex in southwest Greenland.
The company said that the project hosts a mineral deposit that is enriched in neodymium and praseodymium, two essential elements for rare earth permanent magnets used in electric vehicles, wind turbines, and high-efficiency electric motors and pumps that help reduce greenhouse gas emissions.
Located just 60 kilometers from the international airport in Kangerlussuaq, the project is close to tidewater and a major port facility and is directly adjacent to some of the best hydroelectric potential in Greenland, Hudson added.
The license covers the large Sarfartoq carbonatite complex that hosts Hudson's ST1 REE project and the Nukittooq Niobium-Tantalum project. The REEs on the property have a high ratio of neodymium and praseodymium at 25%-40% of Total Rare Earth Oxides.
Hudson completed a Preliminary Economic Assessment on the ST1 project in November 2011 that outlined a National Instrument 43-101 compliant resource containing 27 million kilograms of neodymium oxide and 8 million kilograms of praseodymium oxide.
Three kilometers east of the ST1 Zone is another high-grade zone (ST40) that hosts one of the rare earth industry's highest-known ratios of neodymium oxide to Total Rare Earth Oxide.
Neo, through a special purpose entity ("SPE"), plans to explore and develop the Sarfartoq project to further diversify its global sourcing of rare earth ore and to expand the rare earth supply chains that feed Neo's rare earth separation facility in Estonia.
Neo intends to assign its rights under the agreement to an SPE controlled by Neo that would hold the license and continue exploration and ultimately extraction of the rare earth elements on the project.
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Hudson noted it will receive a nonrefundable initial cash payment of US$250,000 upon signing of the agreement. Upon receipt of approval from the Greenland government, Hudson will transfer the license to Neo or the SPE. Hudson will receive an additional US$3,250,000 upon closing of the transaction.
If within five years from the date of closing of the transaction (1) the SPE transfers the license, or there is a change in control of the SPE pursuant to an acquisition or merger, then Hudson will receive 5% of the total consideration received by the SPE in connection with such transfer, or (2) the SPE conducts an initial public offering on a stock exchange ("IPO"), then Hudson will receive 5% of the fully diluted equity interests in the SPE immediately prior to the IPO.
Neo and the SPE expect to conduct additional exploratory drilling and other work to move the project forward to eventual commercial operation. Neo also intends to enter into an offtake agreement with the SPE with rights to purchase 60% of the ore or mineral concentrate produced from the project.
