On April 6, Greenland will hold a national election which will have significant consequences for two mining stocks, Greenland Minerals (OTC: US$0.144) and Hudson Resources (TSXV: HUD). On February 8, the right-wing Demokraatit Party withdrew from its governing coalition with the main governing Siumut Party because of environmental and social concerns (a potentially unwanted influx of foreign workers) regarding the Kvanefjeld rare earth and uranium open pit mine.
The owner, Greenland Minerals, has been trying for more than 10 years to bring it back into full operation. Shenghe Resources, a large Chinese rare earths company, owns about 10% of Greenland Minerals.
After the Demokraatit Party’s departure, Prime Minister (PM) Kim Kielsen of the Siumut Party called the April 6 snap election on February 16 after Greenland’s parliament threatened it with a no-confidence vote.
Proponents of the mine cite its potential impact of Greenland’s economy, which is heavily reliant on fishing (95% of Greenland’s exports) and funding from the government of Denmark in the form of about a US$600 million annual grant. That grant represents 20% of Greenland’s US$3 billion GDP.
The opposition left-green Inuit Ataqatigiit (IA) Party has announced that it will terminate the project if it wins a majority of parliament’s 31 seats. According to a February 17, 2021 report on the website france24.com, the IA Party is leading in public opinion polls.
Interestingly, even the Siumut Party has adopted a more reserved position on Kvanefjeld since a new party leader, Erik Jensen, was elected in November 2020. He replaced current PM Kielsen.
Greenland Minerals would obviously be impacted by a vote which installed the IA Party as the leader of the government, but it would also negatively affect companies with existing Greenland mining operations like Hudson Resources, as investor confidence in how the government will treat the mining industry will likely be shaken. Hudson Minerals stock has declined around 20% since the February 16 snap election announcement.
A pre-revenue mining and exploration company with a sole focus on Greenland, Hudson Resources owns 31% of the White Mountain anorthosite (calcium feldspar) mine. Hudson Resources originally owned 100% of White Mountain, but financial challenges in 2019 and 2020 forced it to surrender a 69% stake to its lenders Cordiant and Apex.
A key use for anorthosite is a replacement for kaolin, a clay mineral, in the production of E-glass fiberglass. E-glass fiberglass is commonly used in industrial, marine and aerospace applications. Anorthosite also can be used in place of kaolin in paints, coatings and polymers.
Hudson also owns 100% of the Sarfartoq carbonatite exploration project which contains the valuable rare earth element neodymium, as well a high-grade niobium project.
Hudson Resources’ Financial Results
The company’s balance sheet is much stronger after restructuring its debt in the June 2020 quarter. It now has a small net cash position. Despite not yet reporting revenues, Hudson Resources had positive operating cash flow in the quarters ending December 31, 2020 and September 30, 2020 primarily because of notable increases in accounts payable and accrued liabilities.
|(in thousands of Canadian dollars, except for shares outstanding)||3Q FY21||2Q FY21||1Q FY21||4Q FY20||3Q FY20|
|Operating Cash Flow||$23||$589||($500)||($3,635)||($2,003)|
|Debt – Period End||$21||$33||$47,247||$46,313||$43,699|
|Shares Outstanding (Millions)||178.4||178.4||178.4||178.4||178.4|
If the more business-friendly Siumut Party secures a majority in the April 6 elections, Greenland-related mining stocks could benefit. In particular, Hudson Resources’ White Mountain project will produce a valuable commodity which is used in a variety of industries.
The outcome of Greenland’s April 6 election could significantly affect investor perceptions of Hudson Resources and Greenland Minerals. Initial polls suggest that voters may back the left-green party, which opposes Greenland Minerals’ mine.
Hudson Resources Inc. trades at $0.21 on the TSX Venture Exchange, and Greenland Minerals trades at US$0.144 on the OTC.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.