Defense Metals is Seeking the Secret Ingredients of Everything

Photo by Neil Thomas on Unsplash

Daniel Yergin’s riveting tale of the major role oil played in the 20th century, The Prize: The Epic Quest for Oil, Money & Power traces the growing reliance on oil for both global commerce and war. Oil not only powered economies, it also played a pivotal role in the century’s statecraft from Winston Churchill’s decision to shift the Royal Navy from coal to oil in 1911 to the Gulf War.

Today, we are in the emerging stages of the Third Industrial Revolution; developing a carbon neutral electricity grid and this revolution requires a new mix of critical tech metals - some of them quite rare and sourced in countries at odds with America - most notably our power rival China.

A F-35 fighter jet requires 920 pounds of rare metals and a Virginia class submarine 9,200 pounds, according to the Congressional Research Service.

While in 1918, the British statesman Lord Curzon famously said that the Allied cause had “floated to victory upon a wave of oil”. In this century, victory will depend on a river of rare metals 

The following sentence in the book’s prologue sums up the world’s predicament today.

“As we look toward the 21st century, it is clear that mastery will certainly come as much from a computer chip as from a barrel of oil”  

But what’s behind the computer chip and technology that forms the backbone for so much that we take for granted in modern life? The answer is strategic metals and especially rare earths. 

These natural resources are critical to economic growth and advancement of technology. They are also invisibly intertwined with national strategies, geo-politics, wealth, and power. Therefore, National Geographic magazine titled an article on these metals “The Secret Ingredients to Everything.” 

What exactly are rare earths? They are obscure rare metals that are critical in all sorts of products from cell phones to advanced weapons systems, aircraft engines, robots, semiconductors, electric vehicles, wind turbines, and hybrid batteries. 

The real value of these metals is unique electrical and magnetic properties that allow for miniaturization and much lighter, stronger, resilient, and efficient components.

Rare earth metals are very difficult and time consuming to extract from common ores. America is extremely dependent on imports of many of the ingredients that go into electric vehicles including the materials that make up the battery and the electric motor. There is a global race to control many of these technology metals and China is winning.

Over the past few decades, China has become the Saudi Arabia of rare earths as the country’s low-cost labor and lax environmental standards allowed it to produce 85% of world production of rare earth oxides.

Common Defense: America and Canada Working Together

We need to look at meeting this challenge as a North American effort.

One Canadian resource company with the noble and ambitious goal of providing 10% of the global supply of two vital rare earths is Defense Metals. The company’s shares trade in Canada under the symbol “DEFN,” ad on the OTC in the United States under the symbol “DFMTF”.

One of the key markets driving demand for more rare earths is electric vehicles (EV). This is because an electric vehicle uses 1kg to 3kg worth of neodymium–iron–boron (“NdFeB”) magnets in standard drivetrain electric motors. 

Global demand for EVs is expected to grow from 8 million in 2022 to over 40 million by (or before) 2030. This will require huge amounts of neodymium.

Every ten million new EVs require ~10,000 tons of additional neodymium or ~20% of the current annual global supply.

Magnet rare earths neodymium and praseodymium are just what Defense Metals plans to produce from their 100% owned Wicheeda Rare Earth Element Project spread over 4,244 hectares and located 80 km northeast of Prince George, British Columbia, Canada.

Once in production, Defense Metals targets to produce 25,423 tons per year of rare earth oxides over a 16-year mine life, which would make the company a globally significant rare earths producer representing 10% of the current global production.

Defense Metals recently announced the completion of its 2022 resource infill and exploration diamond drilling program which produced promising results.

There are some other positive factors investors need to take into consideration.

First, Defense Metal’s Wicheeda Project has very good road access and is close to critical infrastructure, including rail and power.

“Many rare earth mineral projects in Canada are in isolated areas without infrastructure, whereas we are 80km from Prince George, British Columbia, and the project is accessible by road. We have the potential to be in production in a short time,” says Dr. Luisa Moreno, President of Defense Metals Corp.

Second, it has reached a Mineral Exploration Agreement with the McLeod Lake Indian Band regarding its project that puts in place a framework for communication and cooperation going forward.

Third, Defense Metals can also add value as it tests an acid bake extraction process for rare earths that could lower capital and operating costs. This process is expected to increase the recovery rate for rare earths, compared to the alternative caustic cracking process. A pilot plant and operation are expected in 2023.

Fourth, Defense Metals has an experienced technical and management team that has an equity stake in the company. CEO Craig Taylor, before heading Defense Metals, was a director of Advantage Lithium Corp. and, previously, a director for Patriot One Technologies. Dr. Luisa Morena, the President and Director, is a former rare earths analyst. John Goode, the head of metallurgy, is a global metallurgical engineering expert.

This is speculative idea but well worth incremental positions at current prices. As Defense Metals follows its timeline to develop the project, its stock price should reflect progress as it moves towards production of these two strategic, key rare earths.

Defense Metals is also a sponsor of our Hay Seward Economic Security Council, a nonprofit focused on improving North American supply chain security for critical metals. In March of 2023, it will release a special report on this urgent issue that will include further updates on Defense Metals.

Defense Metals Corp (TSXV: DEFN; OTCOB: DFMTF)