Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced a non-binding memorandum of understanding (MOU) with Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) to test samples with Ucore's new patent-pending rare earth element (REE) separation technology.
Defense said it would ship a rare earth carbonate sample from its Wicheeda rare earth project in British Columbia to Ucore's Kingston, Ontario, plant that uses its RapidSX™ technology to separate the elements.
RapidSX™ "uses the same proven chemistry as solvent extraction, but with a computerized column system that replaces power-intensive and cumbersome mixer-settler tanks," Ucore said on its website. "The columns utilize up to 70% less floor space, significantly reducing CAPEX."
Pat Ryan, chairman and chief executive officer of Ucore, said the opportunity to work closer with Defense is "strategically important."
"Receiving the sample mixed rare earth carbonate at our Kingston CDF (Commercialization and Development Facility) will start the process of determining what may be possible between the companies as we collectively look to fuel the 21st-century energy transition," Ryan said.
China is responsible for two-thirds of current REE mine production and more than 85% of the refined output of REEs. Defense Metals looks to produce as much as 1/10 of the world's needs for the elements when it hits full production.
Canadian Mining Report called Defense a "standout player" in this battle with China.
"The Wicheeda project is being developed as a viable source of REE from North America," Defense Metals Chief Executive Officer Craig Taylor said. "As more processing and separation facilities become operational in the future, the demand for REE feedstock will be increasingly important. This MOU with Ucore is a further step in that direction to be part of the Western world's REE supply chain."
SGS Canada Inc. in Lakefield, Ontario, will ship the sample to Ucore for Defense. The sample was generated during 2023 hydrometallurgical piloting test work performed on concentrate produced by earlier flotation pilot plant testing of a 26-tonne bulk sample from Wicheeda.
"Three years of proving out and independent evaluation have shown a three to seven times increase in throughput," Ucore said about RapidSX™. "It is scalable, modular, and adaptable to different feedstocks and is being readied for commercial deployment."
Noble Capital Markets analyst Mark Reichman reported on this news this morning, writing, "Establishing a North American REE supply chain will require significant collaboration, and we think Defense Metals' Memorandum of Understanding with Ucore represents the beginning of a strategic working relationship that could advance and accelerate both companies’ commercial goals."
With this, Reichman maintained his outperform rating and CA$0.70 target price.
The Catalyst: Standoff With China Grows
Rare earth elements are an important part of the shift to clean energy. They are used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for EVs.
Developing a new mine can take years, and China has been escalating the faceoff, saying it will standardize its REE industry. It already has put restrictions on the exports of some of the substances. On December 21, the communist country banned exporting technologies for processing REEs.
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.
"The country's government can single-handedly halt the output of REEs," the Canadian Mining Report wrote of China. "And it has just done exactly that."
The newsletter called Defense a "standout player" in this battle with China.
Noble Capital Markets analyst Mark Reichman wrote, "We think Defense Metals' Memorandum of Understanding with Ucore represents the beginning of a strategic working relationship that could advance and accelerate both companies’ commercial goals."
"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.
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, (which) can cause a great deal of pain very quickly."
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."
Project Has 'Several Competitive Advantages'
Defense also recently released a significant upgrade to the mineralization of the project with a new mineral resource estimate for Wicheeda.
The updated MRE increased the total rare earth oxide (TREO) by 17%, 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.
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," Reichman said.
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Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE)
The project "has several competitive advantages, including a mining-friendly location, an existing mineral resource with significant expansion potential, an open pit project with favorable metallurgy and well-developed nearby infrastructure, and a strong technical team," Reichman continued in a December 28 update note. "Defense Metals is advancing toward what we think will be a compelling preliminary feasibility study."
Ownership and Share Structure
About 5% of the company's stock is owned by insiders, including Director Andrew S. Burgess with 1.55% or 3.98 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$57.55 million with 255.78 million shares outstanding and 245.49 million free floating. It trades in a 52-week range of CA$0.39 and CA$0.15.
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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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