Drill Results Could Loosen China’s Grip on High Demand Rare Earth Elements

Source: Streetwise Reports   03/08/2022

Rare earth elements are in high demand, and newly released drilling results in Canada could point to a way to help loosen China’s stranglehold on the sector.

Defense Metals Corp.’s (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) newly released drilling results back up the company’s PEA (preliminary economic assessment) that its 100%-owned Wicheeda Project in British Columbia will help it compete with China in the supply of rare earth elements (REEs).

REEs are in high demand — they are used in purifying water, diagnosing ailments with MRIs, feeding more people with better fertilizers, weapons research, and in reducing emissions with wind turbines and permanent magnet motors for electric vehicles.

“You could say China has a stranglehold on REE, just as they did with microchips.”

---

Free Reports:

Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.

Download Our Metatrader 4 Indicators – Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter

---

—Bob Moriarty, 321 Gold

Having most REEs sourced from China is a “ticking time bomb,” said Bob Moriarty of 321Gold.

“You could say China has a stranglehold on REE, just as they did with microchips,” Moriarty said. “If the governments of Canada and the U.S. don’t get their act together, the lack of domestically sourced REE will destroy … EV manufacturing in the West. Action needs to take place soon.”

About 60% of the global mine production of REEs is centered in China, which accounts for more than 85% of the processing capacity. China has also consolidated three of its state-owned rare earth companies into one: China Minmetals Rare Earth Co., according to Forbes.

Defense Metals projects it will produce 25,000 tonnes of rare earth oxides per year at Wicheeda, or about 10% of the world’s current production.

Wicheeda’s robust 2021 PEA demonstrated an after-tax net present value (NPV@8%) of CA$517 million for the site. The project’s 43-101 technical report shows a 5 million tonne indicated resource at 2.95% TREO and 29.5 million tonne inferred resource, averaging 1.83% TREO calculated from 4,000 meters of drilling. The PEA does not include results from additional drilling completed in 2021.

Investments Needed for National Security

Even with environmental concerns, the future depends on the West taking control of the resource, the company said.

“We cannot stop mining,” Defense Metals President and Director Luisa Moreno told Forbes last month. “Our way of life depends on advanced materials — from the car we drive to the buildings that house us. We need these advanced materials. We need to educate the people that mining is no longer irresponsible or compromised. Most companies are adopting environmental, social, and governance standards. They are working with environmentalists and engineers to ensure that the mining is cleaner and safer.”

The U.S. government has taken notice of the imbalance of access to the elements and announced a $35 million Department of Defense grant being given to MP Materials Corp. (MP:NYSE) to separate and process REEs at its facility in Mountain Pass, Calif. MP Materials is also investing another $700 million to create more than 350 jobs in the permanent magnet sector by 2024.

Investments are needed in the sector not just for green technologies, but for national security, said Lehigh University Associate Professor Zach Zacharia.

“It seems crazy when you think about it that some critical chip for an F-35 might be having to come from some other country that potentially could be an enemy,”  Zacharia told WFMZ in Allentown, Pa.

Moreno notes that, of the more than 200 minerals known to contain REEs, only a handful are currently known to be economically viable from a processing standpoint. Two of those —monazite and bastnaesite — are notably rich in REE, and figure dominantly at Wicheeda.

“The PEA reports drilling results that greatly increase the size of the deposit (at Wicheeda); and, better still, the PEA confirms that Wicheeda’s coarse-crystalline rare-earth minerals (monazite, bastnaesite and parasite) can be cheaply processed,” Defense Metals Director Dr. William H. Bird said in a recent letter to investors.

Drill Results Point to Potential

The company is now releasing results from its 2021 drilling program that are amplifying the potential of the site. Two infill holes from Defense Metals’ 5,300-meter Wicheeda program completed last fall intersected the highest-grade REE mineralization to date at the site, with one hole returning 6.01% TREO (total rare earth oxide) over 23.4 meters and significant widths of mineralization above the 0.5% TREO lower cutoff.

A second hole yielded 3.19% TREO over 138 meters, including 4.00% TREO over 55 meters, the company announced.

“We continue to be encouraged by the results of the 2021 resource expansion and infill drilling campaign,” Moreno said. “The two holes reported (March 3) have returned the highest grade REE intercept to date at 6.01% TREO, while also confirming significant widths of potentially economic grade REEs consistent with our geological and resource models.”

Results from an initial four holes totaling 795 meters were released on March 2, and more results are expected soon. The first hole returned assays of 3.17% TREO mineral resources over 196 meters, including 4.29% TREO over 55 meters at depth expanding high-grade REE mineralization 32 meters beyond the current mineral resource pit shell.

The second hole intersected mineralized dolomite carbonatite to a depth of 117 meters downhole grading 2.97% TREO over 114 meters, the company said. The last two holes established continuity of significantly REE-mineralized dolomite carbonatite at depth, including 3.87% TREO over 120 meters in one hole and 2.35% TREO over 172 meters in the other.

Defense Metals Has Edge in Processing

The company has an edge in processing at Wicheeda. The average grade of the ore at the site is 2.33% TREO.

“Because we have coarse grained REE minerals with high REE metal content, we can upgrade through direct floatation to about 40% TREO,” Moreno said. “Other REE deposits of similar grade are upgradable only to 10% or 15% TREO. This gives us the advantage of being able to process our ore at much lower costs than others.”

Defense Metals also signed an MOU in August 2021 with Sinosteel, a leading Chinese REE processor.

Byron King, who follows the REE sector closely (and is a Defense Metals shareholder) explained, “While we all recognize the importance of breaking free of China’s dominance in the REE sector — both mining and processing — we also have to recognize that China is where the expertise lives. If you want to learn to dance, you need to hire a dancing teacher. Sinosteel can be that teacher for Defense Metals.”

The strategy of getting as far down into the upstream is essential, King said. “The end users of these REEs have very specific requirements. Filling those needs starts at the mouth of the mine, but it is crucial to take the rock and turn it into the highest-value material you can get.”

Wicheeda, located 80 kilometers from Prince George, British Columbia, benefits from ample infrastructure. Highways, logging roads, gas and electrical lines facilitate operations. Nearby air, rail, and seaport connections provide transport options.

“All of these factors are in our favor, compared to other REE projects in locations farther to the north, like Québec and the Northwest Territories,” Moreno said.

Finally, it is in a friendly mining jurisdiction, with a skilled workforce at hand.

That workforce will be kept busy with a redoubling of drilling efforts, both in-field and expansionary, which Defense Metals has planned for 2022. The company also continues to release results from its 2021 drilling program that support the site’s potential.

As of March 7, Defense Metals’ market cap is $54.6 million. It has 160.6 million shares outstanding, or 199.6 million with warrants and options, and 5% of the company is owned by management and insiders.

Disclosures

1) Steve Sobek compiled this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None.
2) Byron King’s disclosures: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Defense Metals; shares were purchased on the open market. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I am not offering personal investment advice in any manner, to anyone.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Defense Metals Corp. Click here for important disclosures about sponsor fees. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of Defense Metals Corp. Please click here for more information.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Defense Metals Corp., a company mentioned in this article.