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Richard Mills

Richard Mills

Richard is host of www.aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites including: Wall Street Journal,…

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Must Read - Anorthosite Has Huge Three Market Potential

As a general rule, the most successful man in life is the man who has the best information

Aheadoftheherd: Rick could you give us some basic facts regarding Greenland, an introduction if you will.

Rick: Greenland is the largest island in the world, its located in the North Atlantic Ocean adjacent to the Canadian arctic archipelago. About 84 per cent of Greenland is ice cap but there's an ice-free zone around the ice that's up to 300 kilometers (kms) wide.

We're talking an area of about 410,000 km². Just to give your readers a reference as to how big an area that actually is, Germany is 357,000 km².

AOTH: Greenland's been making news over the last while about being one of, if not the last, frontiers for resource extraction. How prospective for discovery is this immense area?

Rick: Very. As I mentioned just over 80 percent of Greenland is covered by the ice sheet, the exposed area suitable for mineral exploration and project development forms a fringe around the coast.

These non ice covered coastal areas are simply an extension of the Canadian Shield so Greenland's geology is continuous with that of Canada and includes:

  • Archaean cratons - potential for diamonds, gold, REE
  • Palaeoproterozoic mobile belts - potential for base metals, PGE's, gold and tantalum
  • Lower Palaeozoic sediments - potential for base metals
  • Carboniferous Cretaceous sediments - potential for coal
  • Lower Tertiary intrusive complexes, the Skýrgaard intrusion being the most important in terms of gold and PGE potential

AOTH: The geology is the same as Canada's north, are working conditions?

Rick: I would say they are very similar. You are working in the north, summers are cool, short and there is a lot of daylight, winters are long, cold and dark. Exploration programs cannot be run in either area when its deep winter. Miners of course mine year round.

Canada's north has major highways with secondary road access into many areas and its possible to permit road construction. The area that's non-accessible via the current road system is immense and that necessitates winter roads, occasionally river barges and a lot of fly in camps.

Greenland doesn't have a highway system to speak of, people live in towns on the coast or further up the fjords, so they mostly travel by boat, planes and helicopters. Travel by sea is possible throughout the year from Nanortalik, in the South, to Sisimiut in the north west, these ports have a year round shipping season.

Travel from Sisimiut to sites further north doesn't start till May, at the earliest, because of ice, although climate change is playing a role here with sea ice disappearing at an advanced rate.

AOTH: In Canada's north mostly everything is done by road/air and in Greenland everything is done sea/air.

Rick: In Greenland, if you are working in the southwest part of the country, you are never far from year round open deep sea water, meaning a sea port, or the possible future site of a rough loading dock, tie up for a couple of barges and deep water anchorage for a freighter.

I believe this is a huge advantage, let's call it like it is, exploration is exploration, sure one area might be more expensive then another but so what? The main consideration factor is what are you going to do if you actually find something and this is the advantage sea borne freight has over road transport - cost.

AOTH: Access to the sea puts the world's smelters, end users, middlemen etc at your fingertips. But sea transport also lowers your upfront development costs and capex/opex when it comes time to build and run your mine.

Rick: Yes. If you are in the interior of Canada's north you need to road transport your product, usually across vast distances, to get it to a railhead or port, sometimes utilizing both a railway and ocean freighter to get it to a smelter. Of course the reverse order applies when you are doing exploration and development.

Transport distances in Greenland from your project site to open water are usually very short, we're talking maybe tens of kilometers with some projects much closer versus road transport measuring hundreds of kilometers in Canada's north.

The more complicated, the more time consuming, the greater the distances, the more players, or pieces if you will that are involved makes it that much more expensive.

AOTH: Something you mentioned regarding the sea ice is interesting, is global warming opening up Greenland for exploration?

Rick: Yes, but not in the way many think. The ice cap is up to three kilometers thick in places, it may be melting a little around the edges and on top but if you wait for land to open up from that you'll be sitting for a while.

As I said you can travel by sea throughout the year from Nanortalik, in the South, to Sisimiut in the north west, these ports have a year round shipping season. With the continuing disappearance of the sea ice its possible more of the fringe along the coast will become accessible for longer periods of time.

That's what's going to offer increased opportunity in Greenland.

AOTH: What about current opportunities in Greenland?

Rick: Well for sure Hudson Resources TSX.V - HUD with its White Mountain Anorthosite project is one company that will get a lot of attention.

AOTH: You've previously written about Hudson's Neodymium Magnet Mine, this anorthosite project is something new?

Rick: They only started looking at it a year ago. In February of 2012 they pulled some drill core from their diamond hunting days. This several year old core had been originally logged as plagioclase and no one thought a lot about it at the time.

AOTH: What kick started their interest?

Rick: Over the last couple of years there's been huge increases in liberation techniques - leaching projects, acid regeneration plants.

Work was continuing on their 100 percent owned rare earth project, Sarfatoq, they drilled some more in 2012, it looks like the deposit has expanded, but the main focus for a while is going to be the metallurgy.

So as I said they re-looked at this core and they have this huge anorthosite body, a calcium feldspar body, on their exploration license. It's a silica containing aluminum, calcium, low soda and one percent iron. No heavy metals, it's very clean.

AOTH: Chasing the anorthosite is attractive why?

Rick: There are several major reasons to try and develop this project. First it could be a new source of feedstock to the high-end fiberglass industry and a very quick road to cash flow. Second we're looking at potentially a new source of alumina to supply aluminum smelters and this has huge market potential, much bigger than the fiberglass market. And the third reason is for filler material, fillers are a significant component of the plastic paints and paper industries. This has the potential to be high value, but needs a lot of work and it's much more a marketing strategy than anything else.

AOTH: Why mention the fiberglass first if the Aluminum is the bigger prize?

Rick: It's a quicker road to potential cash flow. We're talking about engineered fiberglass products - not pink insulation - it's glass fiber that would go into a plastic. A lot of piping is moving to fiberglass from metal. It doesn't corrode, and it lasts much longer and has high strength. A lot of parts are being manufactured out of fiberglass, gaskets etc.

AOTH: Your talking about replacing kaolin?

Rick: Yes. Kaolin is a major component of the glass fiber manufacturing industry but the right anorthosite would be pretty much a ready-mix replacement. The key's are that it has low iron and soda content.

Hudson has already proven that a magnetic separator can reduce the iron content of its anorthosite from the current one percent to 0.25 percent so that's feasible. As for the soda levels they are averaging 2.3 percent and need to be below 2.5 percent.

AOTH: Is mining going to be difficult?

Rick: The anorthosite is right at surface so it's pretty much a quarrying operation just a few kilometers from the coast. They would drill, blast, haul, crush, separate and load onto a boat. Doubtful mining gets much easier or cheaper.

AOTH: Why hasn't this been done in the past?

Rick: There's literally no other high, high calcium, low sodium feldspar that I know of outside of Greenland. There's a deposit in Norway that has been looked at for a while but they have their own unique set of challenges why it hasn't happened. I suspect it has to do with the fact that they can't get the sodium numbers down to where they need them to be.

AOTH: There's lots of anorthosites in North America.

Rick: True, but they are all mainly in the high potassium side of things. Anorthosites run from low calcium-high potassium to the opposite, which are called bytownite or pure anorthite, which is the purest form with the highest calcium and lowest sodium.

Hudson's Greenland White Mountain project seems to have the right composition that hasn't yet been found elsewhere.

Most of the largest fiberglass producers in the world want to look at it, they see the advantages and HUD is in some trial operations with a number of them doing small scale bench testing. One end user is being sent a 120 tonne bulk sample.

AOTH: The second thing you mentioned as a possible use for the anorthosite was as a source of alumina to supply aluminum smelters. Currently aluminum smelters use the Bayer process consuming bauxite, is Hudson envisioning their anorthosite as a replacement for bauxite?

Rick: Yes. The unique thing about this anorthite-bytownite-type material is that it's very leachable - it's highly soluble in hydrochloric acid, 90 to 95 percent of the alumina goes into solution.

Leaching tests also show that the silica doesn't go into solution, you filter that out and you get this amorphous silica product, which has a market in itself. Then you're looking at extracting the calcium and the alumina out of the solution, with very little iron in it that's easily managed.

The key here will be in acid regeneration, that means you can actually get back the hydrochloric acid that you put in. This is pretty much off-the-shelf technology that has been really advanced in the steel industry over the last number of years. When you're looking at the pickling of steel and the manufacture of steel, they use hydrochloric leaching and acid regeneration, and that saves a lot of costs.

Hudson is hoping to be competitive with the Bayer process today where they might not have been 20-25 years ago.

AOTH: Hudson is looking at their White Mountain anorthosite as a replacement for kaolin and bauxite, to put it in a nutshell.

Rick: Yes, that's exactly right. Let's make it clear, they are not reinventing the wheel, there's no black-box technology or anything. This is proven off-the-shelf technology that they can use if they have the right compositions.

Of course there's ever changing economics caused by environmental concerns and rising costs working for them as well.

AOTH: Please explain that a little more.

Rick: Well, I think that if bauxite producers were to factor in the cost of sequestering the red mud, their tailings, margins would change. My understanding is that in the past this has not been a cost that has been incorporated into the cost of alumina production. The red muds were literally thrown in the ocean, that's simply not an acceptable way of tailings management. Currently there's no use for the red mud, which is basically hematite and other material, some of which is said to be toxic.

The other thing is that costs for caustic soda continue to go up, that's the acid if you want, that they put the bauxite in. And there's the calcining. Once they've put the bauxite into the caustic soda, you have to calcine it, heat the solution at a high temperature to get the alumina, and then you consume enormous quantities of hydro-electric power to use the electrolysis process to actually create the aluminum.

AOTH: Alcoa's building an aluminum smelter in Maniitsoq Greenland aren't they?

Rick: They are looking for cheap hydro-electricity to make aluminum out of imported alumina. There's the potential for a 600 megawatt electrical plant at Maniitsoq so building that plant will give them cheap hydroelectricity and that is the key for aluminum production. So, they will be importing alumina from far afield, from very far afield, Africa, Australia, South America, Caribbean etc.

AOTH: How close is the White Mountain project to tidewater?

Rick: The body of the deposit comes as close as two to three kilometers but they have found a very natural route to the water that's roughly seven kilometers long.

AOTH: What are Hudson's plans for 2013?

Rick: On the Rare Earth side of things, their Sarfartoq rare earth project will potentially see some drilling but mainly they will be working on the metallurgical process, the flow sheet. They need to advance the extraction of the rare earths to the point where a deep pocketed partner would be very comfortable coming in knowing these large projects require upwards of 4-500 million dollars to build out.

AOTH: In order to attract the type of partner they need it all has to be laid out, here's the flow sheet, here's how you get your end product, here's how you actually liberate those elements from a rock, and it can be done economically.

Rick: They should certainly benefit from the unusually high neodymium and praseodymium content in the deposit. Based on the resource HUD should probably average around four kg of material per tonne of rock.

AOTH: Well, before the Rare Earths got going neodymium was trading in the $15-$20 per kg range. It ran up in the bubble to $400-$500 and it currently trades between $80-$100 a kilo. So, that's still a very attractive rock value.

Rick: HUD released an updated 43-101 resource report early in 2012 based on 50 holes totaling 12,700 meters of drilling. The resource estimate includes indicated resources of 5.9M tonnes averaging 1.8 percent total rare earth oxides (TREO) and inferred resources of 2.5M tonnes averaging 1.6 percent TREO, that's based on a 1.0 percent cut-off grade.

A Preliminary Economic Assessment (PEA) demonstrated robust economics with a Net Present Value of $616M at a ten percent discount rate, pre-tax and a 2.7 year payback with a 21 year mine life.

AOTH: Metallurgy?

Rick: The rare earths are hosted in bastnasite and monazite mineralization, these are the key minerals with proven extraction capabilities in the REE industry.

AOTH: The ST1 Zone the 43-101 resource report was based on contains one of the industry's highest ratios of neodymium and praseodymium to TREO, at 25 percent.

Rick: Right, the ST1 indicated resource contains over 26 million kilograms of neodymium and praseodymium oxide, which are the key components in permanent magnets and the fastest growing sector of the rare earths industry.

AOTH: None of the 2012 drilling was included in the latest resource estimate?

Rick: In 2012, nineteen holes for a total of 5,555 meters were drilled in the vicinity of the ST1 Zone resource. Hudson demonstrated that the mineralization extends to the northeast and intersected some of the highest-grade material ever drilled on the project. Drilling to the south confirmed that the mineralization continues at depth with the high ratio of neodymium to total rare earth oxides continuing at 23 percent.

I expect that these results will increase the overall grade and tonnage of the resource when they have been incorporated into the next resource estimate.

All this within twenty kilometers of tidewater.

AOTH: You're not going to be able to extract your rare earths without having some kind of radioactive material, either uranium or thorium as a byproduct. There is a ban on uranium mining in Greenland, however recently the rule was 'relaxed' some, how does this affect Hudson, if at all?

Rick: It really doesn't. All rare earth projects have radioactive material association and Hudson has 500 ppm or .05% thorium associated with Sarfartoq's rare earths.

A mining license, which Hudson is currently operating under, allows exploration for everything but uranium. All mining exploration licenses specifically exclude the exploration for, or ultimate exploitation of radioactive elements and oil and gas. There is not a company working in Greenland that can explore exclusively for uranium and have the notion that they can actually exploit it.

Yes thorium is a radioactive element but it currently has no market. Hudson has no plans to sell it, and again, as I said, their licensing gives them no rights to sell it, but what the recent rule change or the relaxation if you will, of the radioactive policy does give HUD, is that they have the right to continue to explore. It also gives them the right to submit exploitation applications for the rare earths, knowing full well that there is thorium associated with it.

AOTH: What kind of work can we look forward to being done on White Mountain?

Rick: There's a huge market for alumina, only the steel market is bigger. So, a flow sheet is priority, they want to study energy consumption and recoveries.

AOTH: Hudsons White Mountain project is 4,000 km from North America or Europe. Some twenty ships went through the Bering Strait to China in 2012. Because of melting sea ice is direct shipping to China going to be a possibility? That being thrown out there it's not very much to get HUD's product on a boat and send it anywhere.

Rick: My guess is they'd need a slightly higher ice-rated boat for probably four months of the year, but other than that, probably any vessel can ship in and out eight months of the year.

At Teck's Red Dog mine in Alaska, they road transport and stockpile their concentrate on the coast. Their port is shallow for quite a ways out so they barge it out to the ships and send it to port in Vancouver for rail shipment to their smelter in Trail BC. It's amazing what seaborne freight does for you.

Transporting thier concentrate

Deep Water Access Map

Hudson's looking at a fjords deep water. One or two barges anchored to the side of the fjord to load a ship, basically a large 30,000 tonne vessel anchors and you load it. Pier requirements would very limited.

AOTH: Hudson just released their first 43-101 resource estimate for their White Mountain anorthosite project.

Rick: The estimate outlined an indicated resource of 27.4M tonnes plus an inferred resource of 32.7 M tonnes. The resource parameters and 2.50 percent sodium (Na2O) cut off were based on the feedstock requirements needed for the fiberglass industry.

The resource remains open in all directions and there is absolutely no doubt in my mind that it is many times larger than the current estimate.

AOTH: Thank you Rick, it's been informative and a real pleasure.

Rick: Thank you.


Disclosure: Richard does not own shares of Hudson Resources TSX.V - HUD. Hudson Resources TSX.V - HUD is a sponsor of Richard's website aheadoftheherd.com


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