Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced it has hired two companies as principal consultants for its preliminary feasibility study (PFS) of its Wicheeda Rare Earth Element (REE) project in British Columbia.
SRK Consulting Inc. will lead coordinating the National Instrument 43-101 report and handle the mining and tailings scope of work with support from APEX Geoscience Ltd., Defense Metals said.
Hatch Ltd. will focus on REE concentrating and hydrometallurgical processes and plant facilities, as well as capital and operating costs.
Defense Metals is looking to steal some of China's stranglehold on the sector — it accounts for about 60% of REE mine production and more than 85% of the refined output of REEs.
The Wicheeda rare earths project in British Columbia has the "excellent infrastructure and a large, growing resource" to take on China, Paradigm Capital senior analyst David Davidson wrote in an April research note.
"The Wicheeda deposit is one of the more advanced light rare earth element (LREE) projects in North America," wrote Davidson, who has given the stock a Speculative Buy rating and a CA$1.25 per share price target. "With the push to source more critical elements domestically, Defense Metals is well positioned to take advantage of this opportunity."
Technical Analyst Clive Maund wrote on July 19 that although the stock's "price hasn't moved — yet," he expected that to change. "The heavy volume driving this advance and the soaring Accumulation line resulting from this is very bullish."
World politics may be playing right into DEFN's hand. China recently decided to restrict the export of two metals critical to superconductor production, gallium, and germanium.
While these metals are not being sought by Defense at Wicheeda, company officials worry China may eventually target the REEs the company wants to provide for green technologies like wind turbines and electric vehicles (EVs).
Technical Analyst Clive Maund wrote on July 19 that although the stock's "price hasn't moved — yet," he expected that to change.
"The heavy volume driving this advance and the soaring Accumulation line resulting from this is very bullish," Maund noted.
The Catalyst: Possibility of a 'Compelling' PFS
SRK was previously involved in the preliminary economic assessment (PEA) published in 2022. SRK will build on that knowledge to "create an optimal development plan for Wicheeda, Defense Metals said in a release.
SRK will also be project lead and work with risk assessment, surface water management, contact water treatment, and environmental geochemistry.
Early successes of the testing process and the results of drilling in 2021 and 2022 point to the possibility of a "compelling" PFS, Noble Capital Markets analyst Mark Reichman wrote. He rated the stock Outperform with a CA$0.90 target price.
Both SRK and Hatch have extensive experience and knowledge of the REE sector, the company noted.
Defense Metals recently updated Wicheeda's 3D geological model with 10,000 meters of new drilling from 47 holes completed in 2021 and 2022, which the company called a "significant milestone." Updating the resource estimate and completing the PFS is next up.
Early successes of the testing process and the results of drilling in 2021 and 2022 point to the possibility of a "compelling" PFS, Noble Capital Markets analyst Mark Reichman wrote. He rated the stock Outperform with a CA$0.90 target price.
Davidson with Paradigm Capital wrote that he expected "positive surprises" in the upcoming resource estimate from the company.
"We expect to see the total resource increased by at least another 10–15% and a modest improvement in overall grade," he wrote. "In addition to the drilling, considerable metallurgical work has also been undertaken, particularly regarding assessing acid bake technology opportunities, which should provide a higher degree of confidence in eventual REE recoveries."
Clock Is Running Out
Defense Metals wants to reduce North America's dependence on Chinese REEs and produce as much as 10% of them. But time on the clock is running since it can take years to develop a mine into production.
"This geopolitical conflict . . . related to semiconductors that are essential for military, AI, telecommunications, and transportation technologies raises the emergency for the West to develop critical materials and supply chains," Defense Metals President Luisa Moreno told Streetwise Reports. "China is the largest producer of rare earths, and it can at any time impose broad 'export restrictions' in the same fashion is now imposing on gallium and germanium."
Davidson with Paradigm Capital wrote that he expected "positive surprises" in the upcoming resource estimate from the company.
Canada's government introduced its Critical Minerals Strategy, backed by nearly CA$4 billion, late last year.
The government promised to review the permitting process to cut the time required to bring new mines online by avoiding duplication and ensuring early First Nations engagement.
Companies will get help applying for permits and federal support through the Critical Minerals Centre of Excellence, which is already operating with a team of about 15 people.
REEs are in high demand as the economy shifts into greener territory. They are used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs).
Streetwise Ownership Overview*
Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE)
The global market for the elements is expected to grow from US$2.6 billion in 2020 to US$5.5 billion in 2028, according to a report by Fortune Business Insights.
"The rising demand for consumer durables such as tablets, laptops, and smartphones (are some) 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."
Ownership and Share Structure
About 5% of the company's stock is owned by insiders, including Director Andrew S. Burgess with 1.63% or 4.18 million shares, and CEO Taylor with 0.98% or 2.5 million shares, according to Reuters.
About 11% of the company is owned by institutional entities, including RCF Opportunities Fund II LP, with 10%, the company said. The rest, 84%, is retail.
Defense Metals has a market cap of CA$56.27 million with 255.78 million shares outstanding, 212.98 million of them free floating. It trades in a 52-week range of CA$0.39 and CA$0.17.
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