DEFN:CC - EV-Driven Rare Earth Oxides Market Primed to Triple By 2035 - And a Canadian Exploration Company Is Going For a Large Piece Of The Action
While Western economies are bound to be dependent on Chinese provision of refined rare earth elements for the coming decade, reliance on them for the mining part of the process could drop drastically over the coming years . New mines are en-route to becoming operational across the world.
Rare earth metals have exceptional magnetic and conductive properties – which has led them to be adopted as key components for more than 200 products across several markets, encompassing from household electronics to electric vehicles, wind turbines, and many defense applications such as lasers, guidance systems, displays and radar/sonar systems.
One of the key REE is neodymium, or NdFeB – an alloy which creates the strongest permanent magnet discovered to date. NdFeB is one of the cornerstones of the world’s clean energy goals such as reaching carbon neutrality by 2050. These specific magnets are used in wind turbines, energy-efficient applications and EV drive trains. Each EV battery produced requires approximately 1kg of REEs, and a single wind turbine uses up to 600kg.
The value of the global rare earth oxide market is primed to triple within the next 13 years. By 2035, the current market cap of US$ 15.1 billion could grow up to $46.2 billion, per a report published by independent research firm Adamas Intelligence.
The report also predicts a shortage of primary and secondary supply sources of rare earth oxides starting as early as this year and going well into the coming decade. Current producers are unable to increase their output enough to meet demand, which could lead to a major neodymium-praseodymium oxide shortage over that period.
The research group predicts as much. As per the report: “We forecast that global shortages of neodymium, praseodymium and didymium oxide (or oxide equivalents) will collectively rise to 21,000 tonnes annually by 2030 and 68,000 tonnes by 2035 — an amount roughly equal to China’s total production last year”
This growing demand and a global supply that is not yet up to speed to meet it have paved the way for several new exploration projects to prop up across the globe. Enter Defense Metals – a Canadian mining company holding what could be North America’s next great rare earth elements source.
Securing regional provision
Defense Metals Corp. ( TSX.V: DEFN ) is a Vancouver-based junior exploration company operating in Canada. It engages in the acquisition and exploration of mineral properties. DEFN owns a 100% interest in the Wicheeda project in BC – a land package consisting of of six mining claims covering an area of 1,708 hectares with favorable mineralogy and lanthanide distribution – making it a promising light-rare-earth deposit.
While their exploration efforts are in early stages, recent assay results showcase the Wicheeda project’s immense perspectivity – backing the company’s promising preliminary economic assessment (PEA).
The Wicheeda project has the potential to be a world-class rare-earth producer. The site is strategically located along a major forestry service road which connects to BC Highway 97. It’s near a major hydroelectric power line, a major gas pipeline and a Canadian National Railway line.
It’s located in the Prince George region of BC – a traditional mining center with skilled workforce just 80km out from the site.
Lastly, the Port of Prince Rupert is 500km away and is accessible by both rail and road.
Outstanding economics supported by a strong resource foundation
Their November 2021 PEA showcases a Net Present Value (NPV) of $765 million. However – it’s worth noting that at the time of its publication, rare earth prices sat at around half their current value.
DEFN’s revenues from rare earth mineral concentrates (year 1-4) and mixed rare-earth hydrometallurgical precipitate (years 5-16) are projected to average $367 million. The company expects to have an operational project hydrometallurgical plant by year 5, and to feed it directly from their production.
The PEA presents an estimated output of 1.8 million tonnes per year (Mtpa) via open-pit mining. The Indicated Mineral Resource is 5.0 million tonnes, averaging 2.95% TREO, and a 29.5-million-tonne Inferred Mineral Resource, averaging 1.83% TREO.
Most recently, the company reported reaching its highest-grade x width intercepts to date, averaging 3.09% TREO over 251 metres, including 3.92% TREO over 80 metres; and WI21-59 returning 2.76% TREO over 212 metres; including 3.25% TREO over 90 metres from surface.
DEFN President and Director, Luisa Moreno, stated as part of the press release: “We are extremely pleased to publish the last assay results for our 2021 Wicheeda REE Deposit drill campaign with some of the highest-grade and widest drill intercepts encountered to date on the Project. Our first hole of 2021 yielded 3.17% TREO over 196 metres within the untested northern zone (WI21-33). With the final holes released today we have WI21-59 collared 200 metres to the south besting that result with exceptionally REE high grades over a 250-metre interval.”
Other notable recent drilling results out of Wicheeda include 3.81% Total Rare Earth Oxide Over 117 Metres; Including 4.87% Over 38 Metres and 3.79% Total Rare Earth Oxide Over 150 Metres; Including 4.77% Over 60 Metres – with one of their holes yielding the highest-grade single assay to date: 1.41% neodymium-praseodymium oxide at 10% TREO.
Thinking ahead
DEFN has a well-defined roadmap to production – and the team has secured several high-potential strategic partnerships such as the one with world-leading mineral testing company SGS Canada Inc., compliance experts in SKR Consulting Inc. and Sinosteel Equipment and Engineering Co., Ltd – a product trader and mining project construction company that recently landed another rare-earth-element project in Western Australia.
Comparable-sized companies such as Australia’s Vital Metal (ASX: VML) have significantly larger capitalization while holding a much more modest resource estimate (Mcap of US$250M with a 0.1Mt resource estimate @ 36% TREO).
With the RREE supply crunch ramping up, a strategically located provider that is set to enter production as the global rare earths supply crunch enters its peak could show itself to be a value investor's prime opportunity to enter the sector at uniquely underpriced levels. DEFN’s market cap now sits at just US$ 47 million.
A bountiful reserve, favorable minerology, conventional metallurgy and an excellent infrastructure led by an experienced tech team make Defense Metals a high-upside rare earths play worth digging deeper into.
About Defense Metals
Defense Metals Corp. ( TSX.V: DEFN ), a junior exploration company, engages in the acquisition and exploration of mineral properties in Canada. It has an option to acquire 100% interest in the Wicheeda project consisting of six mining claims covering an area of 1,708 hectares located in British Columbia.
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