January 18, 2023
Canada's rare-earth wealth is in the spotlight.
These metals are used in the most high-tech applications. From wind turbines to touch screens, EV motors, and military applications such as radio batteries and man-portable air defense systems... you can't have high technology without rare-earth elements.
And Canada has plenty of them.
The country has some of the largest reserves and resources of REEs on the planet. In 2021, the Canadian government estimated the total volume at about 14 million tonnes.
And these metals are in high demand.
Two megatrends are driving it.
First, decarbonization. The world economy is turning away from fossil fuels and toward clean energy.
This transition cannot happen without rare-earth elements. In fact, the International Energy Agency says that the demand for them could increase by three to seven times by 2040 based on clean energy needs alone.
And then there's defense.
Most of the world's REEs are mined in China. About 63%.
The United States recognizes that relying on China for the metals used in defense, among other applications, is less than ideal.
After all, China isn't part of any military alliances that the United States is part of.
It's not a NATO member, and, on the contrary, it positions itself as a military and political challenger to the alliance.
But Canada is part of NATO. It's one of the closest (both politically and geographically) partners of the United States.
Canada is the perfect candidate for mining rare-earth elements for the United States' tech and defense sectors.
And the US military has already started looking for potential partners in Canada.
The US Department of Defense has already had "preliminary discussions" with several Canadian mining companies working on rare-earth projects.
The details are scarce, given that the military is involved.
However, the Department of Defense confirmed that Canada-based projects might qualify for an investment from the US military.
Experts point out that these discussions are part of a broader strategy of the US and its allies to reduce their reliance on non-friendly regimes, including China.
This is called "friendshoring," or moving supply chains within the borders of democratic economies.
With potentially hundreds of millions of dollars in US government funding, the Canadian rare-earth industry could see a renaissance.
And the Canadian government has announced a $3.8-billion package in federal funds that would be used to boost the country's production of critical minerals. Rare-earth elements are on that list, of course.
Which companies can benefit from this interest and investment?
To an extent, the whole Canadian rare-earth sector has exposure to these minerals.
But advanced exploration and development stage companies could be the biggest winners.
For example, Defense Metals Corp. (TSXV:DEFN, OTCQB:DFMTF, FSE:35D).
The company is based in Vancouver, Canada. It owns the Wicheeda rare-earth project in British Columbia.
The project has two massive catalysts, in our opinion.
First, it has an existing preliminary economic assessment (or a PEA). The study, released in January 2022, includes a US$367-million after-tax net present value .
(The company's current market capitalization is about US$47 million.)
Second, the company expects to complete a pilot plant at the project in the second quarter of this year.
The pilot plant is part of Defence Metals' strategy of advancing Wicheeda toward a prefeasibility study (a more advanced and detailed economic study).
But the company already says that if Wicheeda reaches the production stage, it could potentially supply 25,000 tonnes of rare-earth oxides (or REO) to the global market, including the United States.
Wicheeda could produce more REO than Australia and Russia combined.
The project also has favorable infrastructure. It is accessible by road with rail and power infrastructure close by.
Investors are already putting Defense on their radars.
In December 2022, the company closed a $6.1-million private placement.
On the day the transaction closed (December 8), the offering price of C$0.28 per share was higher than the company's market price.
This is a sign that the company arranged the financing on favorable terms. Defense says that the offering was oversubscribed.
In other words, there was a lot of demand for the company's shares and warrants (one-half of a warrant per share, exercisable at C$0.32, which was 52% higher than Defense's share price on the day the transaction closed).
Most recently, Defense brought on board Mr. John Robins from the Discovery Group as a strategic advisor. He is a mining veteran with billions of dollars' worth of mining deals to his credit.
With a strong team and a project in one of the best mining locations in the world with the potential to supply over 10% of the current global production of rare-earth oxides, Defense Metals could become a Canadian rare-earth leader.
Visit the Company's website at www.defensemetals.com and www.sedar.com for further information about the company and its Wicheeda REE project.
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