Analyst coverage on Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) was recently initiated by Noble Capital Markets given the mining company's potential to help supply rare earth elements (REEs) to the world, reported analyst Mark Reichman in a March 16 research note.
"Defense Metals is well-positioned to benefit from growing demand for rare earths (REs) for use in electric vehicle batteries, metal alloys and advanced technology applications," Reichman purported. "We anticipate more activity in the rare earths and critical minerals space as capital flows to attractive opportunities, including growing demand for RE and critical minerals, limited supply sources and increasingly supportive government policies."
Noble rated Defense Metals Outperform and assigned it a US$0.70 per share price target. In comparison, Defense Metals' current share price is around US$0.25.
Reichman highlighted the compelling aspects of the Defense Metals story.
Notably, the RE explorer's cornerstone project Wicheeda is well-advantaged and "has the potential to be a globally significant producer," he wrote.
A preliminary economic assessment completed in January 2022 indicated the project is worth advancing "based on significant resource potential, favorable metallurgical recoveries and attractive return potential," Reichman wrote.
Once commercial production is reached at Wicheeda, the project should yield about 25,400 tons of rare earth oxide each year, which equates to about 10% to 15% of the current global supply. Defense Metals is moving its project forward.
At this stage, Wicheeda has an existing resource. Current Indicated resources are 5,000,000 tons (5 Mt) averaging 2.95% total rare earth oxides (TREOs). Inferred resources amount to 29.5 Mt averaging 1.83% TREOs. By adding direct flotation to the recovery process, the company could increase its TREOs percentage to about 40 to 50.
These current Wicheeda resources do not include any 2021 drill results, which will add ounces. It only takes into account ounces from about 4,000 meters (4,000m) of previous drilling. This year, starting in May, Defense Metals intends to drill 5,300m at Wicheeda. Once completed, the company will incorporate the results of last and this year's drilling into a preliminary feasibility study, expected in H1/23.
Also beneficial to Defense Metals, Reichman noted, is Wicheeda's location. It is in the mining friendly jurisdiction of British Columbia and a place with ample infrastructure.
Another plus is the Defense Metals' strong management and technical team, comprised of well-qualified and experienced people. CEO Craig Taylor has years of experience as a director or officer of mining explorers and developers. President Luisa Moreno, also a director, is a REEs expert. Each board member brings a different area of expertise to the group.
Lastly, Reichman pointed out, Defense Metals could be a potential takeout target by a larger REEs producer.
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ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE: Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis. Named WSJ 'Best on the Street' Analyst and Forbes/StarMine's "Best Brokerage Analyst." FINRA licenses 7, 24, 63, 87.
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