Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced it has finished its Phase 2 of pit geotechnical drilling at its Wicheeda rare earth element project (REE) in British Columbia.
That data and data from a 503 line-kilometer airborne magnetic and radiometric survey taken over a 45-square-kilometer area of the project have been delivered to the company's team for review. The company said it would release results as available.
"We . . . are encouraged that open pit geotechnical drilling has intersected significant widths of REE mineralized carbonatite within the western pit wall not previously known," said Defense Metals President and Chief Executive Officer Craig Taylor. The ongoing Wicheeda Project PFS (preliminary feasibility) study remains on target for completion at the end of Q2 2024, and the data gathered as part of this drilling campaign will provide key inputs to inform the open pit slope design work by SRK."
The company's team is currently ranking targets for drilling next year, he said.
Defense also recently released a significant upgrade to the mineralization of the project with a new mineral resource estimate for Wicheeda.
Noble Capital Markets analyst Mark Reichman said the company was "on a positive trajectory going into 2024."
Noble Capital Markets analyst Mark Reichman said the company was "on a positive trajectory going into 2024."
"The 2023 mineral resource estimate . . . is a significant upgrade compared to the previous estimate and can be included in the mine plan for the preliminary feasibility study that is expected to be completed in the first half of 2024," he wrote.
"Coupled with a larger and upgraded mineral resource estimate, Defense Metals is advancing toward what we think will be a compelling preliminary feasibility study," continued Reichman, who has rated Defense's stock Outperform with a CA$0.70 per share target price. "Near-term, we look forward to results from the Phase II geotechnical drilling program."
The updated MRE increased the total rare earth oxide (TREO) by 17% at Wicheeda, or a 31% tonnage increase, compared to a prior MRE in 2021.
The MRE comprised a 6.4 million tonne Measured Mineral Resource, averaging 2.86% TREO; a 27.8 million tonne Indicated Mineral Resource, averaging 1.84% TREO; and an 11.1 million tonne Inferred Mineral Resource, averaging 1.02% TREO.
The results are reported at a cut-off grade of 0.5% TREO within a conceptual open pit shell, the company said.
The Catalyst: A New Anomaly Found
Defense Metals said that during the campaign, it completed six diamond drill holes totaling 1,182 meters within the Wicheeda REE Deposit pit shell, including four open pit geochemical drill holes totaling 920 meters and additional near-mine exploration holes totaling 262 meters.
"South and west pit wall drill holes WI23-81 and WI23-82 intersected significant widths of visibly REE-mineralized dolomite carbonatite from surface over core intervals of 54 meters and 21 meters, followed by a 65-meter core interval of xenolithic-dolomite carbonatite," the company said in a release. "Drilling of WI23-82 into the west pit wall of the Wicheeda Deposit was successful (in testing) a new ground radiometric anomaly."
"With permitting progress and a feasibility study imminent next year, the analyst sees Defense Metals on a positive trajectory," Reichman wrote. "Its financial position remains strong after another quarter of exploration spending, ending September with CA$7.6 million in cash."
The company also said it cut nine sonic overburden drill holes totaling 160 meters and 14 test pits totaling 62 meters designed to support shallow soil subsurface and bedrock foundations for potential future waste rock storage, a mineralization stockpile, a contact water pond (CWP), a crusher, a processing plant, and tailings storage facility (TSF) locations.
Defense is currently mobilizing to complete Phase 3 of the sonic overburden and test pit campaign with ten sonic overburden drill holes and three test pits. This program is expected to be completed in four weeks.
Reichman also noted that Defense had shipped samples from Wicheeda to potential customers and partners as it works toward securing future offtake agreements.
"With permitting progress and a feasibility study imminent next year, the analyst sees Defense Metals on a positive trajectory," Reichman wrote. "Its financial position remains strong after another quarter of exploration spending, ending September with CA$7.6 million in cash."
Taking on China
China accounts for as much as 70% of current REE mine production and more than 85% of the refined output of REEs. Defense Metals looks to produce as much as 10% of the world's needs for the elements when it hits full production.
REEs are in high demand as the economy shifts toward clean energy. They are used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for EVs. But it can take years to develop a mine into production.
China has been upping the ante in the faceoff, saying it will standardize its REE industry and already has put restrictions on the exports of some of the substances.
In October, Beijing announced that it would require permits for some graphite products used in electric vehicle (EV) batteries, to protect national security. Last summer, China instituted export restrictions on gallium and germanium, important to the semiconductor industry, after President Joe Biden had barred the sale of some advanced chips and chip-making technology to China.
"We're in a cold war essentially on the trade front now," Jeff Green, a defense industry consultant and Washington lobbyist, told The Washington Post. "I think the U.S. government is responding in kind."
U.S. Secretary of Commerce Gina Raimondo warned recently, according to The Post, that "China has a head start, and that means we have to work a little harder and a little faster. They have the technology and sustained investment . . . to dominate the market for critical minerals. And we all know, if China were to point that new direction unfavorable to us, it can cause a great deal of pain very quickly."
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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$51.16 million with 255.78 million shares outstanding and 212.98 million free floating. It trades in a 52-week range of CA$0.39 and CA$0.18.
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