I know of no sector in the resource space as hard to get a handle on as that of the Rare Earths or REOs, AKA REEs. In the last twenty years I have only come across one investor who actually understood which companies had red meat and which were pushing tofu. Since 321gold is a tofu free zone, I've been hesitant to even start writing about the sector.
Months ago one of my advertisers, Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTC; 35D:FSEQB), approached me about writing a piece about them and their potential. More or less I agreed since I haven't written anything about REEs for the longest time but I insisted they hand me something that would make it clear to my readers just what their potential was.
To be clear, REE or REOs are not rare. There are seventeen elements called Rare Earths and while they are quite common, it is not common for them to be concentrated sufficiently to justify the expense of exploration and building a processing facility for mining them.
Defense Metals has a project they call the Wicheeda property located in central British Columbia about eighty km north of Prince George. The property has excellent infrastructure, is on a primary forest service road connecting to a major highway and has experienced mining professionals located nearby.
My primary problem was a lack of understanding of just what the value of a ton of rock could be. It's all well and good to be quoting % grade and thickness of intercepts but that is pretty meaningless unless and until someone can come up with a value of the rock in the ground.
Management of DEFN answered me in spades. The company just drilled a 13-hole program at Wicheeda. They have released results from the first two holes, eleven more are coming soon. Two weeks ago they released results from a metallurgy study to determine their ability to concentrate the material and show recovery.
I'm astonished they have so far failed to post the press releases on their own site but they didn't and the numbers are most important. They ran a flotation test and managed to produce a concentrate of 48.7% TERO (Total Rare Earth Oxide) from a head grade of only 4.81%. In addition they showed an 85.7% recovery. Those are exceptional numbers. With any mineral deposit, the cost of shipping concentrate is vital to know. To concentrate by a factor of ten fold is excellent.
The two holes released so far showed both good grade and length of intercept. From near surface, hole WI19-20 reported 64 meters of 4.32% TREO. Hole WI19-21 showed a grade of 3.26% REOs with a length of 110 meters. The company is using a cut off grade of 1.0% of LREE (Light Rare Earth Elements).
But without knowing some idea of the value of a ton of rock, investors are left alone in the cold and dark. I asked for some indication of what those assays meant in real dollar terms. And again, it's a little loosey goosey because these metals are not traded on exchanges so these numbers are not written in rock, just an indication.
Based on the head grade of 4.81% of the material submitted for testing an approximated gross metal value at today's indications of price would be about $585 USD per ton. You would need to discount that by 20% to get a recovered gross metal value in the ground. That's about $468 USD per ton or equal to about 10 grams of gold. Those are great numbers for grade and for reported intercepts of the first two holes.
China and the U.S. are at loggerheads and engaged in a serious trade war. I am not a fan of any war, having been through two years of one. In my experience, no one wins any war; all that happens is that one side loses more than the other.
Since the Chinese have probably read a history book or two and U.S. politicians live in an echo chamber, the Chinese see the U.S. as a morally and fiscally bankrupt state in a rapid condition of decline. If the U.S. is going to become a third world country, the Chinese don't care about doing trade with us.
Rare Earth Elements are necessary for all sorts of modern technology. If the Chinese maintain a strangle hold on supplies the U.S. had better put their spurs on and start developing supplies from more friendly neighbors.
I have maintained for years that the way to profit in any venture is as simple as buying cheap and selling dear. Everyone wants to make investing complex and that's utter nonsense. If you can figure out when things are cheap you should buy them and when they get expensive you should sell them.
Defense Metals is certainly cheap. The company did their IPO at $0.15. All of the financings to date have been from $0.15 to $0.25. The serious long-term investors are all in at higher prices. The metallurgy is comparable to the top three REE mining companies in the entire world. At today's price the company is valued at a tiny $2.5 million USD. That's insane. The company has everything going for it except understanding from retail investors and I hope this piece helps.
I am an investor in DEFN. They are advertisers and naturally that makes me biased. Do your own due diligence.
Defense Metals Corp.
DEFN-V $0.105 (Nov. 04, 2019)
DFMTF - OTCQB 30.2 million shares
Defense Metals website.
Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
[NLINSERT]Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Defense Metals. Defense Metals is an advertiser on 321gold. I determined which companies would be included in this article based on my research and understanding of the sector.
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