Updates to Defense Metals Corp.'s (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) 3D geological model of its Wicheeda rare earth element (REE) project in British Columbia have been completed.
The model now includes over 10,000 meters of new drilling in 47 holes completed in 2021 and 2022 that weren't included in the project's preliminary economic assessment (PEA), which was released last summer.
The new model "represents a significant project milestone and [a] culmination of two years' worth of focused exploration," Defense Metals Director and geologist Kristopher Raffle said.
"This drilling has yielded some of the longest and highest-grade drill intercepts to date on the project and led to the discovery of a new zone of high-grade mineralization at depth that has the potential to positively impact an updated mineral resource estimate," Raffle said.
"Defense Metals is advancing toward what we believe will be a compelling preliminary feasibility study that will incorporate data from the 2021 and 2022 drilling programs," Noble Capital Markets analyst Mark Reichman
The next steps include updating that resource estimate and completing a preliminary feasibility study (PFS).
"Defense Metals is advancing toward what we believe will be a compelling preliminary feasibility study that will incorporate data from the 2021 and 2022 drilling programs," Noble Capital Markets analyst Mark Reichman said in a March 1 research note. He reiterated his Outperform rating for the stock with a CA$0.70 target.
"In addition to [the] significant potential to expand the resource and extend the mine life beyond 19 years, we expect grade enhancement and the meaningful conversion of inferred to indicated and potentially measured resources," Reichman wrote.
Analyst Michael Gray of Agentis Capital wrote in a research note that Wicheeda was well-located with access to key infrastructure and "could become a globally significant producer" of REEs. He set a 12-month valuation of CA$3.50 for the stock.
"DEFN is a best-of-breed North American REE developer that is well-positioned to its leverage-growing global REE demand and government support to become part of a North American REE critical metals supply chain," Gray wrote.
The Catalyst: 2021-2022 Drilling Returns Highest Grades
Most of the post-PEA drilling was undertaken to increase mineral resource confidence from inferred to indicated and measured categories, define the northern edge of the carbonate complex, and provide detailed geotechnical and hydrogeological drilling data for pit slope and mine design for the PFS.
The holes returned some of the longest and highest-grade intercepts from the entire project, the company said.
Analyst Michael Gray of Agentis Capital wrote that Wicheeda was well-located with access to key infrastructure and "could become a globally significant producer" of REEs. He set a 12-month valuation of CA$3.50 for the stock.
Hole WI21-58 returned 3.09% total rare earth oxide (TREO) over 251 meters, and WI22-68 returned 6.7% TREO over 18 meters.
High-grade REE dolomite-carbonatite was discovered in the north area of the deposit, returning 3.17% TREO over 196 meters, including 4.29% TREO over 55 meters to a depth of 201 meters extending 30 meters below the resource pit shell.
"This intercept . . . is considered to offer significant potential for resource expansion and late mine-life resource grade support," the company noted in its release.
As it works to upgrade Wicheeda's resource with more drilling, the company is also building a hydrometallurgical pilot plant SG Lakefield in Ontario.
Construction has started, and commissioning should start later this month, with pilot operations completed by the end of April.
The data from the pilot plant will also be used in the PFS, and the samples will be shared with potential end users.
Breaking China's Grip on Market
China has about 85% of the world’s processing capacity of REEs, which are in high demand in the new green economy for purifying water, MRIs, fertilizers, weapons, research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs).
According to a report by Fortune Business Insights, the global REE market is expected to grow from US$2.6 billion in 2020 to US$5.5 billion in 2028.
Defense Metals hopes to produce as much as 10% of the world’s light REEs to reduce that reliance on China.
According to a report by Fortune Business Insights, the global REE market is expected to grow from US$2.6 billion in 2020 to US$5.5 billion in 2028.
"The rising demand for consumer durables such as tablets, laptops, and smartphones is one 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 owing to an increase in industrialization, building and construction activities, and various digitization activities by governments in the respective countries."
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Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE)
Demand for EVs in western countries is also estimated to create a surge in the consumption of REEs, the report said.
"However, the high cost of these minerals and the monopoly of China-based manufacturers is expected to hinder the market growth," the authors wrote.
Ownership and Share Structure
About 5% of the company’s stock is owned by insiders, including Director Andrew S. Burgess with 2.01% or 4.18 million shares, and CEO Taylor with 1.2% or 2.5 million shares, according to Reuters.
About 5% of the company is owned by institutional entities, including U.S. Global Investors Inc. with 0.72% or 1.5 million shares, Reuters said.
The rest, 90%, is retail.
Defense Metals has a market cap of CA$62.31 million with 207.7 million shares outstanding, 164.9 million of them free floating. It trades in a 52-week range of CA$0.39 and CA$0.165.
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