Toronto-listed Neo Performance Metals will buy from fellow Canadian firm Hudson Resources an exploration project in Greenland that is rich in neodymium and praseodymium – two essential elements for rare earth permanent magnets.

Neo, through a special purpose entity, plans to explore and develop the Sarfartoq project to diversify its global sourcing of rare earth ore and to expand the rare earth supply chains that feed its rare earth separation facility in Estonia.

The project is a key element of its ‘magnets-to-mine’ vertical integration strategy.

The company is pursuing a plan to break ground on a greenfield rare earth permanent magnet manufacturing plant, in Estonia, that is intended to provide European manufacturers with permanent magnets.

Neo will acquire Sarfartoq by making an initial cash payment of $250 000, and an additional $3.35-million upon closing of the transaction. Completion is subject to several conditions, including approval from the government of Greenland for the transfer of the licence, expected to take about six months, and approval of the TSX-V on the part of Hudson.

The licence covers the Sarfartoq carbonatite complex that hosts Hudson's ST1 rare earth element (REE) project and the Nukittooq niobium/tantalum project. The REEs on the property have a high ratio of neodymium and praseodymium at 25% to 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 kilogrammes of praseodymium oxide.

“Based on our significant experience in assessing strategic mineral resources around the world, we believe the Sarfartoq resource in Greenland is a strategic asset that uniquely complements Neo's 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,” said Neo president and CEO Constantine Karayannopoulos.

Hudson president Jim Cambon commented that the company was pleased to bring Sarfartoq one step closer to a commercial reality.

“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."