Rare Earths Co. Starts Phase 2 Testing at Pilot Plant

Source: Streetwise Reports   04/26/2023

Defense Metals Corp. begins the second phase of testing of its hydrometallurgical pilot plant at SGS Lakefield in Ontario. The test will run for about ten days.

Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE) has begun the second phase of testing of its hydrometallurgical pilot plant at SGS Lakefield in Ontario.

The company said the data from Phase 1 led to some changes in the process. The new phase will run for about ten days.

Defense Metals’ consulting metallurgist John Goode said the importance of such pilot plants “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,” Goode said. “The data from the pilot plant will be used in the pre-feasibility study (PFS).”

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.

“Wicheeda is well-positioned with excellent infrastructure and a large and growing resource,” senior analyst David Davidson wrote for Paradigm Capital.

Some analysts think the company and its Wicheeda REE project are in a good position to make an impact on that deficit.

“Wicheeda is well-positioned with excellent infrastructure and a large and growing resource,” senior analyst David Davidson wrote for Paradigm Capital on April 18. Davidson initiated coverage on Defense Metals with a Speculative Buy rating and a price target of CA$1.25 per share.

“The Wicheeda deposit is one of the more advanced light rare earth element (LREE) projects in North America,” Davidson wrote. “With the push to source more critical elements domestically, Defense Metals is well positioned to take advantage of this opportunity.”

Working Toward PFS

The results of the first phase of pilot plant testing showed the viability of the Wicheeda project, another analyst wrote.

“We think early success, along with outstanding results from the 2021 and 2022 drilling programs, bode well for a compelling preliminary feasibility study (PFS),” Noble Capital Markets analyst Mark Reichman wrote

“Given the pilot plant program’s impact on the engineering design and economics of the feasibility study, we think early success, along with outstanding results from the 2021 and 2022 drilling programs, bode well for a compelling preliminary feasibility study (PFS),” Noble Capital Markets analyst Mark Reichman wrote on April 13. Reichman continued to rate the stock Outperform with a CA$0.90 target price.

The objective of the pilot plant is 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.

The Catalyst: Downstream Players Watching Closely

Defense Metals said minor changes were made during Phase 1 of the pilot plant to look at operations and product quality.

The acid bake kiln was tested at a lesser temperature, and regenerated water was used instead of fresh water for the last portion of the testing with no obvious impact on REE extraction, the company said.

Industrial-grade magnesia proved to be more than effective than regenerated magnesia for neutralization and impurity removal in the water leach circuit. However, the company said it was difficult to attain low magnesium content in the rare earth product. Oxalic acid will be used as the precipitant instead for the next phase of pilot testing.

“While there are several early-stage projects in North America, none are as advanced or as well located as Wicheeda,” Davidson noted. “We expect that several downstream players in the space are watching developments closely.”

Davidson wrote that the work had added value to the company and the project.

“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,” he wrote. There is currently only one rare earth mine in North America, Mountain Pass in California.

“While there are several early-stage projects in North America, none are as advanced or as well located as Wicheeda,” Davidson noted. “We expect that several downstream players in the space are watching developments closely.”

Market Expected to Double

The elements 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). [OWNERSHIP_CHART-9678]

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.

“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.”

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$55.04 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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Disclosures:

1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None.

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( Companies Mentioned: DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE,
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