Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) has entered into a Mineral Exploration Agreement with the McLeod Lake Indian Band for its Wicheeda rare earth element (REE) deposit in British Columbia.
Noble Capital Markets Senior Research Analyst Mark Reichman continued to rate the company Outperform with a target of CA$0.90.
The company just finished diamond drilling at the site and is expecting assay results any day. It has also started geotechnical drilling to optimize the site’s open pit slope design.
The agreement with the McLeod Lake Indian Band creates a framework for communication and cooperation between the company and the group as they move forward, the company said.
The agreement “addresses the interests of both parties” and “further de-risks the project,” Noble Capital Markets Senior Research Analyst Mark Reichman said in an updated note on Thursday. Reichman continued to rate the company Outperform with a target of CA$0.90.
“In addition to providing the McLeod Lake Indian Band with input into how exploration activities proceed, the agreement provides economic opportunities for the First Nations community and establishes a path for potential future commercial involvement,” Reichman wrote. “We think the agreement represents another positive step for the company as it advances toward completion of a preliminary feasibility study (PFS) during the first half of 2023.”
Defense Metals Chief Executive Officer and Director Craig Taylor said they had been in contact with the group for three years but only took full ownership of the site in January. Talks began in May, and they reached an agreement last week.
Taylor said as part of the agreement, the company will use its best efforts to enable employment and contracting opportunities for McLeod Lake Indian Band members and businesses.
The Catalyst
Defense Metals is looking for the community support of Wicheeda to be a catalyst. It 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.
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 from 4,000 meters of drilling.
The new green economy is demanding more REEs for purifying water, MRIs, fertilizers, weapons, research, wind turbines, computers, and permanent magnet motors for electric vehicles.
“The electric vehicle market is increasing at such a pace, we have to double our output in the next 10 years just to fulfill the … demand,” Taylor told Streetwise Reports.
More than 3,500 meters of diamond drill holes have been sunk so far at the site this year, and five geotechnical holes are targeting the walls of the planned mine pit.
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 from 4,000 meters of drilling.
In 2021, the northern area of the deposit returned some of the highest-grade intercepts. Two holes returned 3.79% TREO over 150 meters, including 4.77% TREO over 60 meters extending 80 meters beyond the current mineral resource and 40 meters beyond the constraining pit shell.
This interval included 12 meters averaging 8.06% TREO and contained the highest combined neodymium-praseodymium (NdPr) oxide value to date at Wicheeda of 1.41% NdPr oxide at 10% TREO.
Expanding the Resource
Reichman with Noble Capital Markets said data from drilling in both 2021 and 2022 has “significant potential to expand the resource and extend the mine life beyond 19 years.”
“In our view, the Wicheeda Rare Earth Project is shaping up nicely, and progress-to-date bodes well for a compelling preliminary feasibility study,” Reichman wrote. “Defense Metals is well positioned to benefit from growing demand for rare earths used in electric vehicle batteries, metal alloys, and advanced technology applications. We believe the current stock price offers an attractive entry point for investors.”
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.
Defense Metals 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.
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.
Defense metals has a market cap of CA$41.26 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.
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