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Technical Report Filed on Rare Earth Co.s 'Significant Upgrade'

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This company is trying to loosen China's grip on rare earth elements. Find out why one analyst thinks its latest resource estimate adds to value to its flagship project.

Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) has filed the National Instrument 43-101 technical report for its newest mineral resource estimate (MRE) at its Wicheeda rare earth element (REE) project in British Columbia.

The MRE itself was released in September, and according to one analyst, it was a "significant upgrade" for the project.

The updated NI 43-101 report released Monday recommended further exploration and geotechnical sonic drilling, expanded LiDAR surveys for newly acquired claims, airborne magnetic and radiometric surveys, and continued metallurgical studies at Wicheeda.

"Based on the presence of high-grade carbonatite intrusion hosted REE mineralization exposed at surface and intersected in drill core, which exhibits a reasonable prospect for economic extraction, and favorable geology; the Wicheeda Project is of a high priority for follow-up exploration," wrote authors Kristopher J. Raffle and Michael Dufresne for APEX Geoscience Ltd.

For the rest of this year, the report recommended a minimum of 475 meters of sonic overburden infrastructure and pit geotechnical drilling, and geometallurgical sampling and test work.

The authors also recommended ongoing advanced economic studies of the deposit for completion of the preliminary feasibility study (PFS). They proposed a budget of nearly CA$2.5 million for the exploration.

The Catalyst: 'An Excellent Entry Point'

The updated MRE increased the total rare earth oxide (TREO) by 17% at Wicheeda, or a 31% tonnage increase, compared to a prior MRE in 2021.

The MRE comprised a 6.4 million tonne Measured Mineral Resource, averaging 2.86% TREO; a 27.8 million tonne Indicated Mineral Resource, averaging 1.84% TREO; and an 11.1 million tonne Inferred Mineral Resource, averaging 1.02% TREO.

The results are reported at a cut-off grade of 0.5% TREO within a conceptual open pit shell, the company said.

Mark Reichman of Noble Capital Markets kept his Outperform rating on the stock with a target price of CA$0.70 per share.

"In the months ahead, we expect more information regarding the project's process flowsheet to reinforce the project's commercial value," analyst Mark Reichman of Noble Capital Markets wrote following the MRE's release. "We think the current price is an excellent entry point for investors seeking exposure to one of North America's advanced REE projects."

Reichman kept his Outperform rating on the stock with a target price of CA$0.70 per share.

"With over 10,000 meters of additional drilling completed since the 2021 mineral resource, we have now converted 100% of that resource to the measured and indicated categories, in addition to growing the overall resource by 17%," Defense Metals Chief Executive Officer Craig Taylor said.

Updated Model Adds Drill Data From Dozens of Holes

The 2023 MRE, which has an effective date of Aug. 28, is based on an updated geological model incorporating an additional 10,350 meters of drilling data from 45 holes drilled in 2021 and 2022.

"Importantly, we believe the upgrading of resources now demonstrates that we have established the tonnage and grades necessary to carry forward into our ongoing preliminary feasibility study," Taylor said.

Moriarty noted that Defense Metals could produce as much as 10% of the world's REEs at full output.

The company is "well on its way" toward completing the study, Reichman wrote.

The updated NI 43-101 report's authors noted that of the quartered drill core samples collected during the diamond drill program at Wicheeda, results of duplicate samples indicate good repeatability of neodymium (Nd), cerium (Ce), lanthanum (La), and praseodymium (Pr) values.

"This is interpreted to indicate a low 'nugget' effect with respect to REE analysis," the report said. "Excluding primary geological heterogeneity (quarter-core), the data show a homogenous distribution of Ne, Ce, La, and Pr values within the Wicheeda drill core."

Middle East Unrest Threatens Supply

Defense Metals recently announced it had sent samples of mixed rare earth oxide and mixed rare earth carbonate from Wicheeda to select processors, refiners, and metals traders to independently very their quality.

The specifications of the samples generated during this year's hydrometallurgical piloting test work are varied, Defense Metals said. The companies receiving them could represent future offtake or strategic partners for the company.

"Given that rare earth magnet production needs to double in the next decade to satisfy the demand created by electric vehicles (EVs), a new and significant western supplier, such as Defense Metals, is essential," Taylor said.

China accounts for about 60% of current REE mine production and more than 85% of the refined output of REEs.

The violence and unrest in the Middle East show how critical it is for the West to find more sources of the minerals, Bob Moriarty of wrote.

"In an unstable world, it is vital to have control of the resources you need to maintain your economy," Moriarty wrote.

Moriarty noted that Defense Metals could produce as much as 10% of the world's REEs at full output.

Streetwise Ownership Overview*

Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE)

*Share Structure as of 7/14/2023

"The world is in a conflict, and finding a reliable source of supply for critical minerals is far more important than price," Moriarty wrote.

The global market for the elements is expected to grow from US$2.6 billion in 2020 to US$5.5 billion in 2028, according to a report by Fortune Business Insights.

"The rising demand for consumer durables such as tablets, laptops, and smartphones (are some) of the factors driving the consumption of rare earth elements," the report said. "The demand for these elements in developing economies is estimated to expand rapidly." 

Ownership and Share Structure

About 5% of the company's stock is owned by insiders, including Director Andrew S. Burgess with 1.63% or 4.18 million shares, and CEO Taylor with 0.98% or 2.5 million shares, according to Reuters.

About 11% of the company is owned by institutional entities, including RCF Opportunities Fund II LP, with 10%, the company said. The rest, 84%, is retail.

Defense Metals has a market cap of CA$51.16 million with 255.78 million shares outstanding and 212.98 million free floating. It trades in a 52-week range of CA$0.39 and CA$0.18.

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Important Disclosures:

  1. Defense Metals Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
  2. 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. 
  3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  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.

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