Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced it has appointed a leading London corporate finance advisory boutique to review the strategic financing of its wholly owned Wicheeda rare earth element (REE) project in British Columbia.
HCF International Advisors Ltd., specializes in providing financial advisory services with a "primary focus on the metals and mining sector," the company said in a release.
HCF's review will help Defense will thoroughly analyze potential financing options and strategic partnerships for development and advancement of the project beyond the completion of its preliminary feasibility study (PFS), expected in Q2 2024.
The project "has the potential to be a globally significant producer," noted analyst Mark Reichman of Noble Capital Markets in an updated research note on March 20.
"We think the Wicheeda project benefits from significant advantages, including: 1) location, 2) favorable mineralogy, metallurgy, and grade, 3) the ability to produce a REE product as established by pilot plant operations, 4) a long mine life, and 5) social license and support of the McLeod Indian Band," Reichman wrote. "We think the project is well-positioned to serve the growing demand for rare earths sourced from North America."
China is responsible for two-thirds of current REE mine production and more than 85% of the refined output of REEs, which are needed for the transition to clean energy, a fact Western governments would like to change.
Noble rated the company Outperform with a CA$0.70 per share target price, a more than 200% increase over Monday morning's share price.
The Catalyst: A Possible Global Producer
HCF has given its expertise to international mining projects, in particular critical mineral projects in Canada and Africa, Defense noted. In particular, HCF advised Arafura Rare Earths Ltd. on the financing of its Nolans NdPr (neodymium-praseodymium) project in the Northern Territory of Australia.
Nolans will encompass a mine, processing plant, and related infrastructure. An important part of any final investment decision in the project, Arafura said on its website, was to finalize commercially binding sales agreements for a large portion of the offtake from the site.
It hopes to finish Nolans soon enough to "take full advantage of an anticipated mid-2020s supply shortfall in NdPr oxide."
"It is a globally significant and strategic NdPr project which, once developed, will become a major supplier of these critical minerals to the high-performance NdFeB permanent magnet market," the company said.
Defense's Wicheeda also has the potential to become a global producer of REEs, Reichman noted.
"The project has important advantages, including a mining-friendly location within North America, access to well-developed infrastructure and logistics, and a strong technical team," Reichman wrote. "While China remains the largest global supplier of rare earths, Wicheeda is well-positioned to take a leading role in the North American and Global REE supply chain. Once the project commences commercial production, it is expected to produce ~25,000 tonnes of rare earth oxide annually, or roughly 10% of current global production."
Noble rated the company Outperform with a CA$0.70 per share target price, a more than 200% increase over Monday morning's share price.
The company said it had drilled 58 core holes totaling more than 12,000 meters to define the deposit at Wicheeda and provide the metallurgical test samples.
This has led to measured and indicated resources of 34.2 million tonnes, averaging 2.02% TREO, including 17.8 million tonnes of high-grade dolomite carbonatite averaging 2.92% TREO, the company said. It also found 11.1 million tonnes, averaging 1.02% TREO inferred resources.
This represents a 260% increase over the Defense Metals initial 2019 mineral resource estimate and a conversion to (measured and indicated) of 101% of the prior 2021 mineral resource estimate.
It was "rather surprising that its stock is not already higher than it is," Technical Analyst Clive Maund wrote on January 29. He rated the stock an Immediate Strong Buy for all timeframes.
"It is not regarded as being an unduly speculative investment," Maund wrote.
Co.'s Expertise Will Be 'Instrumental'
Defense Chief Executive Officer Craig Taylor said the company will collaborate with HCF on a strategic funding review of Wicheeda.
"Following our PFS, as we navigate the dynamic landscape of the metals and mining sector, having HCF's expertise on board will be instrumental in evaluating and pursuing optimal funding and strategic partnership opportunities, especially in Europe," Taylor said.
Streetwise Ownership Overview*
Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE)
The global market for REEs 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."
REEs are also used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for EVs.
Ownership and Share Structure
About 5% of the company's stock is owned by insiders, including Director Andrew S. Burgess, who owns 1.5%, and CEO Taylor, who owns 0.97%, 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$55.6 million with 258.62 million shares outstanding and 248.44 million free-floating. It trades in a 52-week range of CA$0.35 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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