Co. Shifts Toward PFS for BC Rare Earths Project
Source: Streetwise Reports
June 7, 2023 (Investorideas.com Newswire) The second phase of testing of this company's hydrometallurgical pilot plant has been completed and work on a pre-feasibility study (PFS) for its rare earth elements project has begun.
Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) announced that the second phase of testing of its hydrometallurgical pilot plant has been completed and work on a pre-feasibility study (PFS) for its Wicheeda rare earth elements project has begun.
The company said it intends to complete the PFS in the second half of 2024.
"With the completion of the recent beneficiation test work and hydrometallurgical test work and pilot plant operations, we are now ready to provide our engineering consultants with the metallurgical test data necessary for them to commence the design work that forms a critical part of the Wicheeda project Pre-feasibility Study," Defense Metals' metallurgical consultant John Goode said.
The company wants to produce as much as 10% of the world's light rare earth elements (REEs) to reduce reliance on China, which has about 85% of the world's processing capacity of the elements.
Defense Metals' Wicheeda rare earths project in British Columbia has the "excellent infrastructure and a large, growing resource" to take on that challenge, 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 initiated coverage with 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."
Defense Metals completed a five-day Phase 1 hydrometallurgical pilot plant study at SGS Lakefield in Ontario in April. Using that data, Phase 2 operations were completed in early May after processing 370 kilograms of flotation concentrate.
The results of the Phase 2 study confirmed earlier results achieving extract of praseodymium (Pr) and neodymium (Nd) from the acid bake calcine of more than 90%. The company noted the product generated in Phase 2 was "markedly higher in purity than that of the Phase (1) operation because of a change to oxalate precipitation."
"Based on the results of the Phase I and Phase II pilot plants, Defense Metals believes it now has all metallurgical test data necessary to support the pre-feasibility study," Defense Metals said in a release.
Goode said the importance of such testing "cannot be over-emphasized."
"It provides the opportunity to see if processes are stable and can be effectively controlled, (determines) the effects of in-plant recirculation of solutions and solids, (measures) recoveries and reagent demands, and generates significant quantities of material that can be used for engineering design and environment-related tests," he said.
The Catalyst: A 'Compelling' PFS
The objective of the pilot plant was to demonstrate the processing of Wicheeda flotation concentrate to produce REEs using the acid-bake hydrometallurgy process.
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."
It next plans to update its resource estimate and complete the PFS.
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 in April. He rated the stock Outperform with a CA$0.90 target price.
"We believe the current stock price offers an attractive entry point for investors," Reichman wrote.
Davidson with Paradigm Capital wrote that he expected "positive surprises" in upcoming mineral resource estimates 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."
Downstream Players Watching Closely
REEs are in high demand as the economy shifts to a greener footing. They are used for purifying water, MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs).
According to a report by Fortune Business Insights, the global REE market is expected to grow from US$2.6 billion in 2020 to US$5.5 billion in 2028. [OWNERSHIP_CHART-9678]
"The rising demand for consumer durables such as tablets, laptops, and smartphones is one 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."
Davidson noted the only current REE mine in North America in California ships its concentrate to China for further processing.
"While there are several early-stage projects in North America, none are as advanced or as well located as Wicheeda," he wrote. "We expect that several downstream players in the space are watching developments closely."
Ownership and Share Structure
About 5% of the company's stock is owned by insiders, including Director Andrew S. Burgess with 2.01% or 4.18 million shares, and CEO Taylor with 1.2% or 2.5 million shares, according to Reuters.
About 5% of the company is owned by institutional entities, including U.S. Global Investors Inc. with 0.96% or 2 million shares, Reuters said. The rest, 90%, is retail.
Defense Metals has a market cap of CA$45.69 million with 207.7 million shares outstanding, about 165 million of them free floating. It trades in a 52-week range of CA$0.39 and CA$0.165.
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