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HUDSON RESOURCES INC.Hudson Resources Inc. (TSX-V: HUD)(OTC: HUDRF) is an exploration-stage company that acquires, explores, evaluates, and develops mineral properties.

The company’s primary target resource is Rare Earth metals and neodymium.

It primarily holds 100% interests in two licenses covering the Sarfartoq Rare Earth project and the Naajat anorthosite project, with a total area of approximately 772 square kilometers (298 square miles) near Kangerlussuaq in West Greenland.

Hudson Resources Inc. was incorporated in 2000, has been doing business under its current name since 2007, and is headquartered in Vancouver, Canada.

VITAL STATISTICSTicker Symbol: (TSX-V: HUD)(OTC: HUDRF)

Market Capitalization: $71 million (CAD)

Shares Outstanding: 177 million

Share Price: $0.40 (CAD)

52-Week Range: $0.32 - $0.53

12-Month Target Price: $0.75

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BACKGROUNDRare Earth Elements (REEs) are 17 chemical elements that occur together in the periodic table.

The group consists of yttrium and the 15 lanthanide elements (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium).

Rare Earth metals and alloys that contain them are used in a wide and expanding variety of consumer, industrial, and military devices including microchips, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, and fluorescent lighting, just to name a few.

During the past 20 years, there has been a near-exponential increase in the number of devices and systems requiring REEs.

Just one example is cellular phones — more than 7 billion of which have been made in the last two decades.

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And there is no end in sight for the wireless device market. In fact, as more advanced devices and Internet access spread into some of the poorest and most heavily populated areas of the world, demand for the raw material will only expand.

Coupled with similar leaps in consumption by military contractors, the future for Rare Earth Element production is clear. The only question is where it will come from.

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HUDSON RESOURCES INVESTMENT HIGHLIGHTS

RARE EARTH ELEMENTS

Hudson began exploring the Sarfartoq Carbonite Complex for Rare Earth Elements in 2009 — and has drilled more than 30,000 meters since.

The company has identified a Rare Earth mineral resource and completed a preliminary economic assessment demonstrating the unique economic potential of the project.

Essential to all high-tech industries, REEs are especially essential wherever electric motors or generators are present.

Every gearless wind turbine, for example, requires 200 to 300 kilograms of REEs.

Assets According to Current Resource Model:

• 27 million kilograms of neodymium oxide

• 8 million kilograms of praseodymium oxide

• 31 million kilograms of lanthanum oxide

• 72 million kilograms of cerium oxide

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Preliminary Economic Assessment of the Sarfartoq Carbonite Complex Indicates:

• Net present value of $616 million at a 10% discount rate, pre-tax — already a better than 2,400% increase over today’s indicated share value.

• 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 $60 million, from a 2,000 tonne-per-day open-pit mine and processing facility.

• Operating costs of $105 per tonne.

• Current FOB spot price is approx. $37/kg based on January 2013 prices. Annual Rare Earth carbonate concentrate production of 6,500 tonnes.

E-GLASSHudson Resources is also broadening its business model by taking advantage of the considerable anorthosite deposit located on its White Mountain project.

Anorthosite is a calcium feldspar rock that is primarily comprised of aluminum (31%), silicon (50%), and calcium (15%). The White Mountain anorthosite is unique in its size and purity.

Its primary commercial uses are extremely broad-spectrum and growing.

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Specifically, it is a key component to the production of next-generation fiberglass, called “E-Glass.”

Working together with Owens Corning (NYSE: OC), Hudson completed a successful test production run of a fiberglass furnace in 2015.

The White Mountain project contains 27 million tonnes of the material, indicated, with another 32 million inferred — enough to produce fiberglass for more than a century at a rate of half a million tonnes per year.

THE APPROACHHudson has a 100% interest in the project.

• Fully permitted mining project for 50 years.

• Over 100 years mine life based on current drilling.

• Unique deposit with no significant competitors.

• 10 year supply agreement with world’s premier fibergalss producer.

• Four potential revenue streams from one mine.

• Low capial cost to build mine ($40M, plus $10M in indirects, reclamation, working capital).

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• Simple mine processing translates to low operating costs and attractive margins.

• Excellent infrastructure with fully operational deep water port.

• International airport 80km from the project.

• Production expected in the second half of 2018

GROWTH DRIVERSFor years now, Rare Earth Elements, or REEs, have been critical components in everything from the phones we carry to the cars we drive to the F-35 fighter jets our military says will keep us superior on the battlefield.

Rare Earth metals have become the foundation of the miniaturization process, enabling the electronics we use to be compact and effective.

They’ve been a boon to the commercial tech market, but nowhere is the effect of the REE revolution more evident than in military applications.

The Department of Defense’s new F-35, which contains approximately a half ton of Rare Earths, is just one of a number of advanced weapons systems that rely on them, says former White House official Dan McGroarty.

“The guidance systems on weapons... any of the smart bombs — have rare earths in them. I’d be hard-pressed to name anything that we would consider worth building today... that would not have rare earth compound.” - former White House official Dan McGroarty

American strategic analysts weren’t the only ones to catch onto this, however.

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China: As early as 1992, former Chinese leader Deng Xiaoping indicated REEs could be a source of strategic power.

“The Middle East has oil,” he said, “China has rare earths.”

“Chinese state media this week issued a warning to the United States that it too has power over global supply chains. That coincided with a thinly veiled threat about rare earths, of which the country is a major exporter, from the government’s top economic planning agency.” - CNN, May 2019

China’s strongest advantage was that it did not have to contend with the high labor costs and environmental consequences of Rare Earth mining that slowed production in the United States.

China also devoted billions of dollars in government subsidies to support its Rare Earths industry.

A key milestone came when China gained critical technology that the U.S. had developed, after purchasing what was then America’s largest Rare Earth magnet company, “Magnequench,” in 1995.

It was a jolt, says Ed Richardson, president of the U.S. Magnetic Materials Association:

When they bought the factory, they now had the patents... the equipment... Magnequench employees... [to] teach people how to make the products... We didn’t get it. Unfortunately, this technology was transferred to China before that technology was appreciated.

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RECENT NEWS

HUDSON RESOURCES PROVIDES UPDATE ON THE PROCESS PLANT RAMP UP AT THE WHITE MOUNTAIN ANORTHOSITE MINE

Hudson announced on April 24 that the White Mountain process plant ramp up has achieved 50% capacity and production continues to increase. It is also the feed material that Hudson will micronize to produce GreenSpar15 for the paints, coatings and plastic markets. As previously announced, the company has had several challenges in the production ramp up, which are now well on their way to being resolved. The secondary High Pressure Grinding Roll (HPGR) is limited in capacity to approximately 70% while the company awaits the new gear boxes and ancillary parts. The delivery of these parts has been delayed by approximately one month, but they are expected to arrive on site in mid-May. These parts will be installed when the first ship comes in and the plant is shut down for 3-5 days during loading.

Hudson Resources Provides Update on the Sarfartoq Rare Earth Project in Light of Recent Trade Concerns

HUDSON RESOURCES INC. reports that in light of recent trade tensions between the US and China and it’s implications on rare earth availability outside of China, Hudson is reviewing activities with respect to its Sarfartoq Carbonatite Rare Earth Element (REE) project. Hudson believes the best option is to find a partner to develop the deposit. Hudson brings to the table a mature project and the knowhow on permitting, building and operating a mine in Greenland.

The Sarfartoq project represents one of the industry’s highest ratios of neodymium and praseodymium to TREO (Total Rare Earth Oxides), totaling 25%, based on the inferred resource (see NR2011-01). Sarfartoq 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.

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. A total of 16,514m were drilled at the project. The 2012 drill program (see NR2013-01) outlined numerous high-grade intercepts including:

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• 6 meters of 6.05% TREO (SAR12-03)

• 8 meters of 4.61% TREO (SAR12-15)

• 6 meters of 4.91% TREO (SAR12-01)

• 6 meters of 4.34% TREO (SAR12-15)

A PEA was completed in 2011 based on the production of 6,500 tonnes per annum of rare earth carbonatite concentrate of 42-45% REO. This study was based solely on the NI 43-101 Mineral Resource Estimate released on January 4, 2011 (see NR2011-01), which defined an inferred resource of 14.1M tonnes averaging 1.51% total rare earth oxides (TREO) and did not incorporate 2011 or 2012 drill results.

Jim Cambon, President, commented:

“The Sarfartoq REE project is an excellent REE opportunity with very high neodymium oxide content and is located in a mining friendly, stable jurisdiction. Hudson is focused on production at the White Mountain mine and in an effort to continue to advance the Sarfartoq project we are in discussions with several parties about the potential to joint venture the project to take advantage of heightened interest in non-Chinese REE supplies due to the ongoing US China trade dispute. We are also open to discussions with other interested parties.”

ANALYSISWith this company, what I like the most is the confluence of four extremes.

Coming in from one direction, we have a concerted effort on the part of the Chinese to monopolize a resource — and a successful one that that.

From another direction, we have the technological trend, which indicates an increasing demand for this stuff moving forward.

Simplifying the analysis for us a bit is that the demand across the sectors will be nearly universal. If it contains an electric motor or magnet — which just about everything does these days — it’s affected.

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From the third direction we have a near-total lack of preparedness by our government to see what the Chinese saw more than 20 years ago.

Not only did they fail to stockpile the REEs, but they failed to secure mining rights to known deposits outside of North America.

And from the fourth direction we have this massive deposit, owned by a Canadian company and out of the reach of the Chinese — for now, at least.

As much as 25% of the known global reserves are located here.

And that’s before we even start talking about the fiberglass revenue expected to begin ramping up next year.

E-Glass – the next generation of fiberglass — will likely become industry standard in the next few years, and the biggest manufacturers of the material are already signing off on it.

Monetizing even a modest fraction of the estimated 59 million tonnes of anorthosite locked within Hudson’s White Mountain property would represent billions in revenue.

CONCLUSIONThis stands as a very unique opportunity — and one that’s trading at near-historic lows, despite the fact that the company is pretty far along towards realizing the raw potential of its assets.

Add to this already potent mix the potential crisis the Western world faces with China weaponizing their REE monopoly, and this opportunity becomes explosive.

At $0.40, there is almost no downside.

Upside potential is hard to calculate, even if just one of its two planned business models perform anywhere near expectation.

Recommendation: Buy Under $0.60(HUD.V)/$.49(HUDRF)

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