Teams Work Together on Rare Earth Co.'s PFS

Source: Streetwise Reports 08/16/2023

Consultants and technical teams are working to complete this rare earth elements (REE) company’s preliminary feasibility study for its British Columbia project.

Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced that technical teams and consultants are working to complete infrastructure geotechnical investigations at its Wicheeda Rare Earth Element (REE) project in British Columbia.

The work is being completed by SRK Consulting (Canada) Inc., one of the principal consultants working on the preliminary feasibility study (PFS) for the project, which hopes to enable the West to compete with China in providing the elements.

APEX Geoscience Ltd. is also supporting SRK on the project.

“It is great to see our technical consulting teams making significant headway with the Wicheeda site investigations,” noted Defense Metals Chief Executive Officer Craig Taylor. “Defense Metals has assembled a world-class team of experts who have both the experience and technical skills to bring this project through pre-feasibility.”

Activities planned include excavating test pits and sinking sonic overburden drill holes to look at the shallow subsurface and bedrock foundations of the site to find locations for waste rock storage, a mineralization stockpile, a contact water pond, a crusher, a processing plant, and tailings and storage facility locations.

The Catalyst: ‘Positive Surprises Expected’

Defense Metals recently reached a “significant milestone” when it updated Wicheeda’s 3D geological model with 10,000 meters of new drilling from 47 holes completed in 2021 and 2022. Next up is updating the resource and completing the PFS.

Noble Capital Markets analyst Mark Reichman rated the stock Outperform with a CA$0.90 target price. Early successes of the testing process and the results of drilling in 2021 and 2022 point to the possibility of a “compelling” PFS, he wrote.

Noble Capital Markets analyst Mark Reichman rated the stock Outperform with a CA$0.90 target price. Early successes of the testing process and the results of drilling in 2021 and 2022 point to the possibility of a “compelling” PFS, he wrote.

Paradigm Capital senior analyst David Davidson wrote in an April research note 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.

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.

Project Has ‘Large, Growing Resource’

Defense Metals said a total of 13 excavated test pits and four sonic overburden geotechnical holes for a total of 93 meters had been completed.

Investigations found shallow overburden conditions (zero or less than 1-meter depth). Excavated pit depths range from 1 to 5 meters, and sonic overburden drill holes encountered thicker surface material ranging from 7 meters to more than 36.6 meters depth to bedrock.

Paradigm Capital senior analyst David Davidson wrote in an April research note that he expected “positive surprises” in the upcoming resource estimate from the company.

Also, “as part of the geochemical characterization scopes SRK has completed a review and compilation of site geological and geochemical data and drill core logs that have been acquired since the 2021 preliminary economic assessment (PEA),” the company noted in a release.

SRK was previously involved in the previous PEA and will build on that knowledge to “create an optimal development plan for Wicheeda,” Defense Metals said.

SRK will also be project lead and work with risk assessment, surface water management, contact water treatment, and environmental geochemistry.

The project has the “excellent infrastructure and a large, growing resource” to take on China, Paradigm’s Davidson wrote.

“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.”

REEs in Demand

China currently accounts for about 60% of REE mine production and more than 85% of the refined output of REEs.

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 said it’s possible China may eventually target the REEs the company wants to provide for green technologies like wind turbines and electric vehicles (EVs).

REEs are in high demand as the economy shifts green. They are used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs). [OWNERSHIP_CHART-9678]

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, 212.98 million of them free floating. It trades in a 52-week range of CA$0.39 and CA$0.18.

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Important Disclosures:

1. Defense Metals Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Defense Metals Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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( Companies Mentioned: DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE, )