With the potential of becoming a “preferred vendor” to the US Military, Defense Metals Corp. (TSXV:DEFN) (OTCQB:DFMTF)(FRA:35D) is fast-tracking the development of its high-grade concentrate of rare earth elements (REEs)
Last year, the US spent $649 billion on defense.
That’s more than China, Saudi Arabia, India, France, Russia, the United Kingdom, and Germany – combined.
It’s no wonder that the US is home to 5 of the world’s 10 largest defense contractors.
The largest, Lockheed Martin, generates more revenue from the US government than the combined annual budgets of several government agencies – like the IRS and the Environmental Protection Agency.
The significant investment potential of American defense stocks is clear.
But what if every defense stock relied on one class of resources? And what if restricted supply would spell disaster for the US military and American foreign policy?
Even worse, what if that resource was almost entirely controlled by a hostile foreign government?
There’s no need to wonder. That’s the reality of rare earth elements (REEs) today.
The REE Market is Huge, Growing and Under Foreign Threat
The global rare earth elements market was worth USD$2.80 billion in 2018.
Every advanced weapon in the US arsenal – from Tomahawk missiles to the F-35 fighter jet to Aegis-equipped destroyers and cruisers and everything in between – depend on components made using rare earth elements.
Even the satellites we rely on – for communications to early defense warning systems – need REEs to work.
How critically important are REEs to the American military?
Enough that President Trump made an official determination that domestic production, separation, and manufacturing of rare earth metals is “essential to the national defense” of the US.
And yet, shockingly, in the last few decades, China has come to dominate the REE market.
In fact, between 2004 and 2017, China accounted for 80% of US rare earth imports.
To borrow a phrase, China has the US by the short hairs.
“The Middle East has its oil, and China has rare earth.”
– former Chinese leader Deng Xiaoping in a 1992 speech
However, as tensions with China continue to rise, there’s been a major push to source rare earth metals from North America, and in particular, from Canada.
On December 19, 2019 Canada and the U.S. signed an MOU to reduce their reliance on China for rare earth metals.
One little-known Canadian stock – Defense Metals Corp. (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) – is advancing its rare earth elements deposit , making it a prime candidate to supply the American military.
Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) is so promising, in fact, that the US Department of Defense is reviewing the company to become a preferred vendor.
Right now, Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) stock isn’t on anybody’s radar.
But it could be soon as Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) continues to fast track toward becoming an integral part of a friendly, reliable supply of REEs for the American military machine.
The US Race to Find a Secure and Local Supply of REEs
The US Air Force Research Laboratory announced plans the other day to match an estimated US$40 million to companies that can separate and process a set amount of rare earth elements annually.
“The overall goal is to secure and assure a viable, domestic supplier (of rare earths) for the long-term.”
– The Pentagon
It wasn’t always like this.
From the 60s into the 80s, the US dominated rare earths mining and processing. But they lost that dominance as economics changed and China’s loose environmental standards gave it an advantage.
Today, the US only has a single mine producing REEs: the Mountain Pass mine in California. Even worse, the company that operates that mine sends its REEs to China for manufacturing!
That’s why the US is now on an “accelerated path towards building out more reliable and sustainable supply chains” and is forming alliances with “friendly” suppliers, according to the Financial Post.
Topping the list of friendly suppliers: Canada.
Both Canada and Defense Metals (TSXV:DEFN) (OTCQB:DFMTF)(FRA:35D) Are Positioned To Deliver REEs For Defense Systems
Canada is a good match to meet America’s REE needs:
- In Q2 2019, Prime Minister Trudeau and President Trump committed to develop steady, secure supplies of “critical minerals” in the face of China’s market dominance
- Canada represents 16 advanced rare earths projects
Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D), in particular, is positioned to meet America’s rare earth element needs.
We’ll get to the details in a moment about their progress to date on their British Columbia-based Wicheeda REE Project…
…but for now it’s enough to know that, based on the data collected, the management and geologists at Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) believe their REE project is “one of the highest quality North American REE assets” today.
Final metallurgical test results from a total 40 batch flotation tests designed to produce an optimized Wicheeda process flowsheet through iterative test procedures with varying process conditions informed the final Locked-Cycle Test (“LCT”) that successfully produced19
- 7% light rare earth oxide (LREO) high grade concentrate of cerium, lanthanum, neodymium, and praseodymium oxides (Ce2O3+La2O3+Nd2O3+ Pr2O3)
- 7% LREO metallurgical recovery
- 1 times upgrading ratio from head grade of 4.81% LREO
- 2% concentrate mass yield
Here’s what the world’s leading inspection, verification, testing and certification company – SGS Labs –had to say based on the data:
“Excellent results were achieved through the flotation process, including a high scale-up ratio, to a high-grade concentrate at high recoveries.”
– SGS Labs Executive Summary
If you understand all the technical mining details, you’ll be impressed to hear that according to their NI 43-101 technical report, Defense Metals (TSXV:DEFN) (OTCQB:DMFTF)(FRA:35D) has an Inferred Mineral Resource of 11,370,000 tonnes averaging 1.96% LREE (Ce+La+Nd+Sm+Nb)
High Potential For Near-Term Catalysts in 2020 on the Wicheeda REE Project
If Defense Metals’ (TSXV:DEFN) (OTCQB:DMFTF)(FRA:35D) success to date is any indication of what’s to come, then get ready for the market to pay serious attention to this up-and-coming stock in 2020.
They’ve already completed a successful diamond drilling campaign on their Wicheeda REE Project that included 13 core holes.
Why Defense Metals (TSXV:DEFN) (OTCQB:DFMTF)(FRA:35D) is Being Reviewed as a Potential “Preferred Vendor”
Besides being domestic and considered “friendly”, there are 4 BIG reasons Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) could gain “preferred vendor” status from the US Department of Defense:
Of the 6 most commonly used rare earth elements, those 4 REEs above top the list.
Why? Because they’re used in all the things that keep the US in the dominant military position around the world: high-performance guidance and control systems, electronic jamming devices, next generation electric motors, high-powered laser targeting, line of sight laser communications, and cutting edge fighter jet engine manufacturing.
They’re also the 4 REEs that Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) project has a high grade concentrate of at 48.7% LREO (light rare earth oxide).
No wonder Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) is being reviewed for “preferred vendor” status.
Undervalued in Light of Location & Speed of Progress
Of course, Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) isn’t the only mining company targeting the billion-dollar rare earth minerals market.
Here are just a few comparable companies:
But compared to these other companies, Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) has some BIG advantages.
Advantage #1: Location
One of Commerce Resource’s projects is up in Nunavut. Ucore’s primary focus is on a property way up in Alaska. Search Minerals’ site says this about its Red Wine project: “further exploration in the area has been curtailed in favour of focusing on prospects in more accessible regions.”
In contrast, Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) Wicheeda REE Project has everything a mining company looks for in a location: by a major forestry road connected to a highway (#97); major hydroelectric power line; major gas pipeline; Canadian National railway line in the nearby village.
Not to mention a trained workforce in nearby Prince George, a strategic mining center.
Advantage #2: Speed of Progress
Another BIG advantage Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) has that the market loves is speed of progress.
Appia Energy first staked claims on its Elliot Lake Property 16 years ago…the last time they drilled there was 8 years ago. Commerce Resources staked its initial claims on its Blue River Project 20 years ago…the last time they drilled there was 9 years ago.
That’s not to say these companies haven’t taken any other action in recent years, but it certainly doesn’t make investors excited when they see those types of numbers.
In contrast, Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) exceeded its Year 1 and Year 2 exploration spend commitments within 12 months of its option of its Wicheeda REE Project.
That’s the kind of commitment and rapid advancement that gets investors – and the market – to pay attention and jump on board.
- Defense Metals (DEFN.V) plans a significant development push for its Wicheeda REE deposit in 2020 – Equity Guru
- Amid China Rare Earths Sabre-Rattling, U.S. Races to Forge ‘Friendly’ Minerals Alliance With Canada – Financial Post
- Trump Enlists Pentagon on Rare-Earth Magnets Amid Chinese Threat – Bloomberg
Advantage #3: Funding
On top of that, Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) also has the funding to keep up the pace thanks to closing a non-brokered private placement at the end of 2019 for gross proceeds of $1,003,645.
Demand For REEs Isn’t Only From Military Applications
REEs are everywhere in advanced consumer goods – electric and non-electric vehicles, mobile phones, renewable energy equipment – and in developing technologies in the areas of communications, electronics, rare earth permanent magnets, hydrogen storage, and more.
That’s why the global REE market is expected to grow at a CAGR of 10.4% from 2019 to 2025, with North American growth being a major contributor.
Just one example is Tesla’s announcement about using neodymium in its Model 3 electric cars, which is expected to boost demand for neodymium for years to come.
Adamas Intelligence goes further by projecting global demand for neodymium will far exceed production by 2030, leading to shortages if new sources don’t come online by then.
The threat of REE shortages isn’t a new thing.
Even 60 Minutes ran a story on “Rare Earth Metal Shortage” about 5 years ago now.
But tight supply is good news for Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) since it supports price growth.
Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) also welcomes tight supply because, as Grandview Research points out, the highly competitive major players in the global REE market commonly rely on mergers and acquisitions to expand their production capacity.
So, every step Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) takes toward producing REEs, the more attractive it looks as a potential takeover target.
Leadership That Knows How To Build Businesses & Develop Natural Resources
Successful mining companies are led by expertise in the boardroom AND in the field.
Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) is fortunate to have both within its core team:
CRAIG TAYLOR, CEO & PRESIDENT: Craig has the boardroom covered. His executive experience prepared him to lead Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) through to production. He’s served as President and CEO of a private company (Vanville Projects Ltd.); as CEO, CFO, President and director of a former capital pool company listed on the TSX-V (Angus Resources Inc.); as a director on multiple TSX-V exploration companies; and as director and officer of several other public mineral exploration and development companies.
KRISTOPHER J RAFFLE, B.SC., P.GEO & DIRECTOR: Kristopher has resource development covered. In addition to serving as Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) Qualified Person, he’s also a Partner and Principal Geologist with Edmonton-based geologic consulting firm APEX Geoscience Ltd. Kristopher has over 18 years’ North American-focused base and precious metals exploration experience, including everything from near-mine exploration to NI 43-101 reporting, geological modeling, and Mineral Resource Estimates.
ANDREW BURGESS, C.A., C.P.A., DIRECTOR: Andrew has the finances covered. He’s a Chartered Accountant and Certified Public Accountant with more than 35 years of experience with listed companies. He also knows what it takes to keep mining companies successful thanks to his experience with resource companies, covering everything from acquisitions to budgeting and investor relations.
Adding to all that depth of experience is Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) impressive group of advisors, including Alex Knox, M.Sc, P. Geo.; Dale Wallster, geologist and prospector; and Chris Graf, P. Eng.
Defense Metals Corp. (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) could grab the REE spotlight and experience new market cap highs in the 2020 market
Department of Defense reviewing the company to become a preferred vendor:
The DoD is checking out Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) as an integral part of a supply of REEs the American military is very motivated to secure. If approved, this is the type of news that can make headlines.
“One of the highest quality North American REE assets”
Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) has an Inferred Mineral Resource reported in its NI 43-101 technical report of 11,370,000 tonnes averaging 1.96% LREE (Ce+La+Nd+Sm+Nb).
Undervalued in Light of Location, Speed of Progress & Funding:
Between an ideal project location, Defense Metals’ (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) rapid development of that project, and the funds to keep up the pace, the company has lots of room for market cap growth in the near term.
Growing demand for REEs & potential shortages:
Tight supply is good news. It supports price growth, could draw market attention to the sector, and makes Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) more attractive as a buyout target.
High Potential For Near-Term Catalysts in 2020 on the Wicheeda REE Project:
As Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) builds on its success through advanced-stage exploration and discussions and MOUs with potential future purchasers, positive news from any of those activities is only expected to bring more attention and boost their stock price.
Leadership That Knows How To Build Businesses and Develop Natural Resources:
Not all mining companies are led by expertise in BOTH the boardroom and the field. Defense Metals (TSXV:DEFN) (OTCQB:DFMTF) (FRA:35D) is fortunate to have a core team with both types of expertise, and an impressive group of advisors as well.