HUDSON RESOURCES INC. (the "Company") (TSX
VENTURE:HUD)(OTCQX:HUDRF) is pleased to announce the results of the
Preliminary Economic Assessment ("PEA" or "Study") completed by
Wardrop, A Tetra Tech Company (Tetra Tech) on the Sarfartoq rare
earth project in Greenland. This study was based solely on the NI
43-101 Mineral Resource Estimate released on January 4, 2011, which
defined an inferred resource of 14.1M tonnes averaging 1.51% total
rare earth oxides (TREO) for the ST1 Zone and does not incorporate
2011 drill results.
Highlights of the Study include:
-- Net Present Value of $616M at a 10% discount rate, pre-tax
-- Internal rate of return (IRR) of 31.2% and a 2.7 year payback with a 21
year mine life
-- Capital costs of $343 million which includes a contingency of $60M, for
a 2,000 tonne per day open-pit mine and processing facility
-- Operating costs of $105 per tonne to produce an REO carbonate
concentrate
-- Rare earth oxide prices of $32/kg were utilized, based on the three-year
trailing FOB China average price as of October 2011, which were
discounted by 43% to reflect the difference between rare earth carbonate
concentrate and separated individual rare earth oxide prices. The price
of $32/kg is a 74% discount to October 2011 FOB Spot prices
-- Annual rare earth carbonate concentrate production of 6,500 tonnes
-- The proposed metallurgical flowsheet includes bastnaesite and monazite
flotation, leaching, acid bake solvent extraction and precipitation to
produce a 42-45% REO carbonate product. An overall recovery rate of 64%
was used for the study
James Tuer, Hudson's President, stated, "We are very pleased
with the results of the PEA which demonstrate the robust economics
of the project. Having the project located adjacent to tidewater
provides significant economic benefits in both capital and
operating costs. Looking ahead, we expect to have an updated
resource estimate completed in early 2012, which will incorporate
all of the 2011 drill results which includes dozens of high-grade
sections from 2.0% to 6.5% TREO. We plan to update the PEA with the
results of the updated resource estimate in early 2012. As the
project economics are quite sensitive to grade, we are optimistic
that higher project valuations will be reported in the updated
PEA.
"Our plans for 2012 include the commencement of a prefeasibility
study and an extensive drill program which will further delineate
the high grade zones we encountered in 2011 as we well as other
prospective targets that have been identified around the 32 km
circumference of the Sarfartoq Carbonatite Complex. With current
working capital of $12.5M, we anticipate accomplishing our entire
2012 program with our current treasury."
The following table presents a list of the Project parameters
and assumptions derived from the PEA and cash flow model.
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MINING
Mineralized material mined 14,303,139 mt
Waste mined 140,605,204 mt
Total mined 154,908,343 mt
Strip ratio 9.83
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PROCESSING
Run-of-Mine Feed 2,000 t/d
Mining recovery 95 %
Mining dilution 5 %
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RESOURCE GRADE OF TREO 1.51 %
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RECOVERIES
Overall Recovery 64 % Base case
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TOTAL TREO OXIDES IN CONCENTRATE 132,544 t
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RE OXIDE PRICES (FOB CHINA)
La2O3 $41.6 3 year Average US$/kg
Ce2O3 $39.4 3 year Average US$/kg
Pr2O3 $76.9 3 year Average US$/kg
Nd2O3 $88.3 3 year Average US$/kg
Sm2O3 $37.1 3 year Average US$/kg
Eu2O3 $1,134.1 3 year Average US$/kg
Gd2O3 $53.0 3 year Average US$/kg
Tb2O3 $963.3 3 year Average US$/kg
Dy2O3 $512.0 3 year Average US$/kg
Y2O3 $54.4 3 year Average US$/kg
SARFARTOQ TREO DISTRIBUTION (AS PER INFERRED RESOURCE)
La2O3 21.0 %
Ce2O3 50.0 %
Pr2O3 5.8 %
Nd2O3 19.1 %
Sm2O3 1.9 %
Eu2O3 0.4 %
Gd2O3 1.4 %
Tb2O3 - %
Dy2O3 0.1 %
Y2O3 0.3 %
TREO 100.0 %
TREO - Calculated Contained Oxides $56.4 US$/kg
TREO - Base Case $32.0 US$/kg
Discount to account for REO
carbonate product 43 %
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GROSS OXIDE VALUES TREO $4,241,409,596 US$
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EXCHANGE RATE US$/CAN$ 1.009 CAN$
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NET REVENUE (CAN $) $4,279,582,283 CAN$
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OPERATING COSTS (per t milled material)
Mining $35.91 CAN$/t
Processing $63.04 CAN$/t
G & A $1.75 CAN$/t
Sustaining Capital $2.68 CAN$/t
Salvage ($0.09) CAN$/t
Mine Closure and reclamation $0.14 CAN$/t
Operating Capital $1.34 CAN$/t
Supplies and Materials
Transportation $0.05 CAN$/t
Material Transport from Mine to
Mill (Conveying) $0.50 CAN$/t
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TOTAL OPERATING COST $105.32 CAN$/t
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CAPITAL COSTS
DIRECT COSTS
Site Development $38,663,000 CAN$
Site Utilities $5,978,077 CAN$
Tailings Management Facilities $3,783,400 CAN$
Open Pit Mining $24,133,000 CAN$
Material Processing Facilities $96,220,969 CAN$
Hydro metallurgical Plant $41,195,601 CAN$
Non-Process Buildings $9,885,001 CAN$
---------------
SubTotal Direct Costs $219,859,048 CAN$
INDIRECT COSTS
Indirect Construction Costs $12,962,500 CAN$
Owner's Costs $8,267,500 CAN$
Contingency $60,372,262 CAN$
EPCM $41,053,138 CAN$
---------------
SubTotal Indirect Costs $122,655,400 CAN$
TOTAL CAPITAL COST $342,514,448 CAN$
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The financial model cash flow and net present value for various
discount rates are shown below.
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PRE-TAX CASH FLOW
Net Revenue $4,279,582,283 CAN$
Operating Cost $1,515,316,566 CAN$
Capital Costs $342,514,448 CAN$
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TOTAL PRE-TAX CASH FLOW $2,764,265,717 CAN$
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PAYBACK Year 3
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PRE-TAX & PRE FINANCE NPV @ 6% $1,038,161,293 CAN$
PRE-TAX & PRE FINANCE NPV @ 8% $797,700,033 CAN$
PRE-TAX & PRE FINANCE NPV @ 10% $616,448,196 CAN$ Base Case
PRE-TAX & PRE FINANCE NPV @ 12% $477,834,034 CAN$
PRE-TAX & PRE FINANCE NPV @ 15% $325,688,225 CAN$
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PROJECT INTERNAL RATE OF RETURN (IRR) 31.17 %
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All $ values are in $CAN unless otherwise specified.
Proposed Mining Plan and Processing
For the Study, Tetra Tech determined that the mining operation
will use a conventional open pit mining method (truck and shovel).
The mine will provide mill feed at a rate of 2,000 t/d beginning
the first year of the mine life. The overall mining sequence was
developed in three phases: a starter pit (Phase I) and two pushback
phases (Phase II and Phase III). The mine development for the
mineralized material and the waste will progress using 10m high
benches. The ultimate pit design for the selected pit contains 14.3
Mt of Inferred Resource. The average in situ grades over the LOM
will be 1.51% TREO.
For the purpose of this evaluation, it was assumed that the
Company would produce and sell a rare earth carbonate concentrate,
composed of 42% to 45% rare earth oxide. To determine a price, a
notional 43% discount was used on three-year trailing average
prices (October 2011). This resulted in a price of $32/kg of
contained rare earth oxides. The company is planning further
studies, which will investigate the costs and benefits of producing
a separated oxide product.
The flowsheet utilized in the PEA, while preliminary in nature,
is based on assumptions from mineralogy, and incorporates recent
metallurgical testwork from the Saskatchewan Research Council (SRC)
which demonstrated successful extraction of rare earths utilizing
acid baking and leaching. Test work showed that two hours of
baking, at 220 degrees C and approximately one tonne of acid per
tonne of mineralized feed (concentrate) recovers 94% of the
TREO.
Sarfartoq Project Background
Hudson's Sarfartoq rare earth element project in Greenland has
outlined a 43-101 compliant inferred resource of 14.1Mt at 1.5%
TREO at the ST1 Zone. The ST1 Zone represents one of the industry's
highest ratios of neodymium and praseodymium to TREO, totaling 25%,
based on the inferred resource. The ST1 Zone contains over 40
million kilograms of neodymium oxide, which is the key component in
permanent magnets and the fastest growth sector of the rare earths
industry. A total 16,514m over 71 holes were drilled this year. In
addition, a five tonne metallurgical sample was collected from
surface at ST1.
The Sarfartoq REE project is located within 20 km of tidewater
and only 60 km from Greenland's international airport. The project
is owned 100% by Hudson. The Company is currently well financed
with approximately $12.5 million in working capital.
According to the cautionary statement required by NI 43-101, it
should be noted that this assessment is preliminary in nature as it
includes inferred mineral resources that cannot be categorized as
reserves at this time and as such there is no certainty that the
preliminary assessment and economics will be realized. The full
Study will be available at the Company's website
www.hudsonresources.ca and on SEDAR www.SEDAR.com within 45
days.
Qualifications
Ms. Joanne Robinson, P.Eng., Mr. Doug Ramsey, R.P. Bio (BC), Mr.
Daniel Coley, MBA, P.Eng. and Mr. Peter Broad, P.Eng. of Tetra
TEch, Toronto, Ontario, were the qualified engineers responsible
for the PEA study.
Ronald G. Simpson, B.Sc., P,Geo., President of Geosim Services
Inc., is an independent Qualified Person as defined by NI 43-101
and is responsible for the resource estimate on the ST1 Zone and
has verified the data disclosed in this release.
Dr. Michael Druecker is a qualified person as defined by
National Instrument 43-101 and reviewed the preparation of the
scientific and technical information in this press release.
ON BEHALF OF THE BOARD OF DIRECTORS
James Tuer, President
Forward-Looking Statements
This news release includes certain forward-looking statements or
information. All statements other than statements of historical
fact included in this news release, including, without limitation,
statements regarding plans for the completion of a financing and
the intended terms and use of proceeds thereof, and other future
plans and objectives of the Company are forward-looking statements
that involve various risks and uncertainties. There can be no
assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those
anticipated in such statements. Important factors that could cause
actual results to differ materially from the Company's plans or
expectations include market prices, general economic, market or
business conditions, regulatory changes, timeliness of government
or regulatory approvals and other risks detailed herein and from
time to time in the filings made by the Company with securities
regulators. The Company expressly disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise
except as otherwise required by applicable securities
legislation.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Hudson Resources Inc. James Tuer President
604-628-5002 or 604-688-3415 604-688-3452
(FAX)tuer@hudsonresources.cawww.hudsonresources.ca
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