Rare Earths Co. Sees Big Results at British Columbia Project

Source: Streetwise Reports  (10/12/22)

Two core drill holes are showing broad mineralization at Defense Metals Corp.’s Wicheeda rare earth element deposit.

Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) on Tuesday released results from two core drill holes showing broad mineralization at its 100%-owned Wicheeda rare earth element (REE) deposit in British Columbia.

The deepest hole drilled so far on the site at 395 meters, WI22-68, intersected 3.58% total rare earth oxide (TREO) over 124 meters, including 6.7% TREO over 18 meters and one 3-meter sample of 8.58% TREO.

Last month, Noble Capital Markets Senior Research Analyst Mark Reichman issued a note continuing to rate the company Outperform with a target of CA$0.90.

Just last week, analyst Michael Gray of Agentis Capital initiated coverage on Defense Metals, saying Wicheeda was well-located with access to key infrastructure and “could become a globally significant producer” of REEs.

“We are initiating coverage with a high conviction that DEFN is a best-of-breed North American REE developer that is well-positioned to its leverage growing global REE demand and government support to become part of a North American REE critical metals supply chain,” Gray wrote on October 3, 2022, when he set a 12-month valuation of CA$3.50 for the stock.

On Tuesday, he issued a note reaffirming his valuation, saying the hole “outperformed the deposit average.”

“We think the REE-enriched carbonatite unit could be larger than Defense anticipated, with coarse-grained mineralization encountered at depth in hole 68,” Gray wrote.

A second hole released this week, WI22-63, returned 2.29% TREO over 39 meters, including 5.08% TREO over 9 meters.

Last month, Noble Capital Markets Senior Research Analyst Mark Reichman issued a note continuing to rate the company Outperform with a target of CA$0.90.

The Catalyst

Gray said it’s an “excellent time to enter the REE space.” REEs are in high demand in the new green economy for purifying water, MRIs, fertilizers, weapons, research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs).

Defense Metals hopes to produce as much as 10% of the world’s light REEs to compete with China, which has about 85% of the world’s REE processing capacity. Political issues between the United States, China, and Taiwan put that vital supply at risk.

Given those needs, the company said it is moving as quickly as possible with the project.

Gray with Agentis said industries that use the elements are set to expand.

“We have taken our deposit from a bulk sample to pre-feasibility in four years,” Defense Metals Chief Executive Officer and Director Craig Taylor said. “I don’t think there is another rare earth deposit I can think of that has advanced this quickly.”

A preliminary economic assessment (PEA) for Wicheeda in 2021 showed an after-tax net present value of CA$512 million. Its 43-101 technical report showed a 5 million tonne indicated resource at 2.95% total rare earth oxides (TREO) and a 29.5 million tonne inferred resource averaging 1.83% TREO.

About 5,000 meters ended up being drilled this year over 15 holes. Results from 11 holes are still outstanding. The company is expecting to begin a preliminary feasibility study (PFS) before the end of 2022.

Industries Set to Expand

Realizing the importance of REEs, the U.S. government in February announced a US$35 million grant to MP Materials Corp. to process the elements at its California facility. The company has agreed to invest US$700 million to create more than 350 jobs in the permanent magnet sector by 2024.

Gray with Agentis said industries that use the elements are set to expand.

“The fundamentals for REE demand growth (are) very positive,” he wrote. “Demand is high, and forecasts suggest it will continue to grow, vis a vis the markets for EVs, wind turbines, and defense technologies.”

Currently, the analyst covering Defense Metals Corp. include Mark Reichman of Noble Capital Markets and Michael Gray of Agentis Capital. You can see all the analyst and newsletter coverage by clicking “See More Live Data” in the data box above.

Defense Metals recently also entered into a Mineral Exploration Agreement with the McLeod Lake Indian Band for Wicheeda that creates a framework for communication and cooperation between the company and the group as they move forward.

The company is also testing an acid bake extraction process for the REEs that could lower capital and operating costs. High-temperature concentrated sulfuric acid is used to convert the REEs to water-soluble sulfates, which can then dissolve during a water leach. A precipitation process is then used to recover the REEs.

The process is expected to allow for a more than 95% recovery rate for the REEs, compared to less than 90% with the alternative caustic cracking process. Testing for the new process will likely be finished soon.

Ownership, Analyst Coverage, and Share Structure.

Three money managers — Marquest Asset Management, U.S. Global Investors, and Probity/Qwest Funds — own a small percentage of the company. The rest is retail.

Currently, the analyst covering Defense Metals Corp. include Mark Reichman of Noble Capital Markets and Michael Gray of Agentis Capital. You can see all the analyst and newsletter coverage by clicking “See More Live Data” in the data box above.

Defense Metals has a market cap of CA$46.76 million with 183.4 million shares outstanding, 140.3 million of them free floating. It trades in a 52-week range of CA$0.36 and CA$0.17.

Disclosures:

1) Steve Sobek wrote 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.

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