Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) and the McLeod Lake Indian Band (MLIB) entered an agreement to collaborate on design of the Wicheeda project in British Columbia, Mark Reichman, managing director and equity research analyst at Noble Capital Markets, reported in a Jan. 18 research note. The MLIB is a First Nations community comprised of Tse'khene people.
"With this agreement, we think Defense Metals promotes a long-term and mutually beneficial relationship with the McLeod Lake Indian Band which will also have a vested interest in the success of the Wicheeda rare earth project," wrote Reichman.
268% return possible
Following the news, Noble Capital reiterated its target price of US$0.70 per share on the Canadian explorer-developer, priced now at about US$0.19 per share, Reichman noted.
These figures point to a notable potential return for investors: 268%.
Defense Metals is still rated Outperform, Reichman indicated and wrote this about the company's flagship asset:
"In our view, the Wicheeda rare earth element project has several competitive advantages, including a mining friendly location, an existing mineral resource with significant expansion potential, an open-pit project with favorable metallurgy and well-developed nearby infrastructure, and a strong technical team."
Highlights of the agreement
Reichman presented the key responsibilities of each entity as outlined in the co-design agreement.
Together, Defense Metals and the MLIB will develop work plans and budgets for Wicheeda.
As for Defense Metals, when conducting feasibility and environmental studies in the future, it will take into account the MLIB's priorities and interests.
Also, the mining company will pay the MLIB a determined but undisclosed amount upfront. This money will help cover the cost of the band taking part in review activities related to Wicheeda and the cost of post-secondary training in a mining-related field for some of the band's members.
Regarding the MLIB, it will invest CA$665,026 in Defense Metals via a private placement. This will involve the band purchasing 2,557,795 common Defense Metals shares at CA$0.26 apiece. The MLIB will make this transaction once the TSX Venture Exchange approves it.
Defense Metals will use the proceeds to advance Wicheeda.
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