Defense Metals unlocks value in Wicheeda rare earth deposit

As a general rule, the most successful man in life is the man who has the best information

 

 

 

Defense Metals (TSX-DEFN) continues to advance its Wicheeda rare earth deposit north of Prince George, on Thursday releasing the first assay results of a bulk sample program.

 

Taking a 30-tonne bulk sample from the property, located 80 kilometers northwest of Prince George, was the first step of a multi-step plan by Defense Metals to develop the advanced exploration project into a rare earth mine that can provide raw materials for civilian and military uses, in particular the market for permanent magnets requiring the rare earths neodymium and praseodymium, of which Wicheeda appears to have ample supply.

 

The goal of the sample program is to confirm previous bench-scale testing and metallurgical testwork of Wicheeda drill cores.

 

In 2010-11, testing company SGS Canada successfully developed a flotation flow sheet that recovered 83% of the rare earth oxide (REO) and produced a concentrate grading 42% REO. Subsequent hydrometallurgical testing in 2012 on a two-kilogram sample of the concentrate grading 39.7% total rare earth oxide (TREO), produced an upgraded and purified precipitate that contained 71% TREO through a process of pre-leaching and roasting.

 

For more read our Defense Metals has sights set on rare earths, uranium

 

Enough historical drilling had been done to compile an inferred resource estimate of 11.2 million tonnes. The company has plans to produce a 43-101 compliant resource when they can revisit the property this spring.

 

Assay results

 

According to Defense Metals’ news release, “Select head assay results for the 30 tonne bulk sample include 1.77% lanthanum-oxide, 2.34% cerium-oxide, 0.52% neodymium-oxide, and 0.18% praseodymium-oxide which the Company considers potentially economically significant, for a total of 4.81% LREO (light rare-earth oxide) (see Figure 1 below).”

 

 

Of significance is the finding of praseodymium, Wicheeda had, up to now, been viewed as a cerium-lanthanum-neodymium deposit, the addition of Pr not only adds another magnet metal but potentially adds to the economic potential of the project.

 

Also important to DEFN investors and potential investors is how the 30-tonne random sample was obtained from Wicheeda. First, the sample was not taken from a known area of mineralization; it was collected from a single blast trench located about 30 meters east of the 2008 drill pad.

 

Second, the sample was from an outcrop chosen for its proximity to a helicopter landing spot, making feasible the delivery of sampling equipment, and a suitable location from which to fly the 30 sample bags out.

 

The 30-tonne random sample was trucked to SGS’s testing facility in Lakefield, Ontario, crushed to a one-inch rock size and blended, before being further pulverized, and finally analyzed for rare earth percentages.

 

As the colored chart above shows, the assay results have determined that a 30-tonne random sample from Wicheeda blasted and trenched material reveals the presence of four rare earth elements that, if made into oxides (the finished product required by a rare earth consumer such as a battery company), would show up in the following percentages per tonne of total rare earth oxide: 2.34% cerium, 1.77% lanthanum, 0.52% neodymium and 0.18% praseodymium.

 

These results are impressive for two reasons. First, the presence of neodymium and praseodymium is critical, because these two REEs are used in the manufacture of permanent magnets that go into a number of high-tech applications including computer hard disk drives, wind turbine generators, MRI scanners and motors in hybrid and electric vehicles. More on that below.

 

Second, the results indicate a potential light rare earth deposit of significant value.

 

CAD$685 per tonne rock

 

We at Ahead of the Herd did some calculations to determine what the gross in-situ value (ie. before processing or other costs) of the metal in the ground at Wicheeda would be, extrapolated from the 30-tonne bulk sample.

 

From the table below, we see the current rare earth oxide prices. Neodymium (Nd) and praseodymium (Pr) are by far the highest, at a respective US$62.34 and $61.40 per kilogram, compared to lanthanum (La) and cerium (Ce) oxides, at $1.93 and $1.89/kg.

 

 

To get the gross in-situ metal values, we need to have all the numbers in kilograms. Start by multiplying 1,000 (the number of kilograms in a tonne) by the percentage of rare earths as a decimal (eg. 2.34% = .0234) to get the kilograms of rare earths per tonne. Then simply multiply that by the price per kilogram, to get the value of the particular rare earth element contained within a tonne of rock. Doing that gives us the following:

 

Gross In-situ Metal Values

 

Ce @ 2.34%/tonne

1,000 x .0234 = 23.40 kg/t x US$1.93/kg = US$45.16/t

 

La @ 1.77%/t

1,000 x .0177 = 17.70kg/t x US$1.89/kg = US$33.45/t

 

Nd @ .52%/t

1,000 x .0052 = 5.20kg/t x US$62.34/kg = US$324.16/t

 

Pr @ .18/t

1,000 x .0018 = 1.80kg/t x US$61.40/kg = US$110.52/t

 

Adding all four REE prices per tonne gives us a total of US$513.29/t or CDN$685.69/t. That’s the gross in-situ metal value per tonne of a mixed rare earth oxide comprising cerium, lanthanum, neodymium and praseodymium.

 

But wait, it gets better…

 

We know that the Wicheeda deposit has an inferred (not NI 43-101 compliant) resource of 11.2 million tonnes. If the material in the 30-tonne bulk sample is spread evenly throughout the mineralized area used to calculate the inferred resource, if the bulk sample turns out to be representative of the current inferred resource of 11m/t, and remember mineralization is open in many directions, we are looking at a potential gross in-situ metal value of 7.679 billion Canadian dollars! (CAD$685.69/t x 11,200,000 tonnes = CAD$7,679,728,000)

 

 

To put this into terms most resource investors can understand, that is equivalent to a 6 million oz gold deposit grading about 12.7 grams of gold per tonne (or 555,000,000 ozs of silver) - which any precious metal exploration company would be extremely lucky to have.

 

Permanent magnets, EV batteries

 

The identification of neodymium and praseodymium in the 30-tonne bulk sample is probably the best result that Defense Metals could have gotten out of the SGS assay sample results. That’s because these two rare earth elements are valuable due to their use in permanent magnets.

 

As mentioned the prices of neodymium and praseodymium are far higher than more run-of-the-mill REEs like cerium and lanthanum. From the charts below we can see that Nd and Pr oxide prices are up 35-40% from mid-2016 lows.

 

 

One of the most common uses of permanent magnets is in the generators of wind turbines. A 2-megawatt wind turbine contains about 800 pounds of neodymium according to the Bulletin of Atomic Sciences. Allied Market Research estimates the CAGR (compound annual growth rate) of wind turbines to be 7.2% from 2017 to 2023.

 

 

Permanent magnets are also a key technology in the massive transformation that the transportation industry is undergoing, from combustion engine-powered to electric vehicles. Demand for the materials that go into these magnets is only going to grow. An example is neodymium. The market for neodymium-iron-boron magnets is estimated at $11.3 billion; demand for neodymium has increased every year since 2015. (chart below) And with electric vehicle sales expected to grow 24% a year until 2030, it’s a valid question whether there’s going to be enough REE magnet materials to go around.

 

 

According to Roskill, “Demand for rare earth permanent magnets is forecast to show strong growth in the years to 2028, which is expected to further distort rare earth demand ratios with Neodymium, Praseodymium & Dysprosium forming a greater proportion of total demand.”

 

 

The metals consulting firm expects the prices of Nd and Nd-Pr to increase by an annual 15% until 2021, on tight supplies, and demand for neodymium and praseodymium oxides to grow by a respective 5.6% and 7.2% a year, to 2028.

 

While the two REEs are expected to be in high demand for energy generation including wind turbines, this is expected to be dwarfed by automotive applications, according to Roskill. In fact the consultancy believes the importance of neodymium will actually control the entire REE market, “as producers look to target /maximize their Neodymium output, with other REEs becoming by-products…”

 

Since becoming cheaper in the 1990s, neodymium magnets have replaced earlier alnico and ferrite permanent magnets in a number of high-tech applications. Common uses include computer hard disk drives, wind turbine generators, speakers/ headphones, MRI scanners, cordless tool motors, and motors in hybrid and electric vehicles.

 

Nickel-metal-hydride (NiMH) batteries used in certain electric and hybrid vehicle brands contain all four rare earth elements found in the Wicheeda 30-tonne bulk sample: lanthanum, neodymium, praseodymium and cerium.

 

An alloy of these REEs can be found in the NiMH batteries of  GM’s EV1, Honda EV Plus, the Ford Ranger EV and the Toyota Prius.

 

The anode of a rechargeable NiMH battery cell is most commonly a mix of lanthanum, cerium, neodymium and praseodymium. Every Prius contains about 10 pounds of lanthanum.

 

Oil refining, weapons

 

A lesser-known application of lanthanum is for oil refining. Fluid catalytic cracking (FCC) catalysts employ lanthanum and cerium to convert crude oil into value-added products like gasoline. These two REEs substantially increase the activity and stability of zeolites, commonly used as adsorbents and catalysts.

 

 

This use of lanthanum has good potential for DEFN, considering that Alberta is looking at building new oil refining capacity. Premier Rachel Notley announced in December the provincial government is asking for expressions of interest from the private sector to build a refinery that would use Alberta crude oil.

 

One of the most common uses of cerium is in catalytic converters. The average auto catalyst contains 20 to 30 grams Ce per cubic liter. Cerium is also used as a polishing media, in flints for cigarette lighters, inside ovens to prevent build-up of cooking residues, and in flat-screen TVs, light bulbs and floodlights.

 

The US Military is an important buyer of rare earth elements especially permanent magnets. Because neodymium-iron-boron (NdFeB) magnets are so small, light and powerful, they are ideal for defense weapon systems including actuators that control various air surfaces.

 

 

Smart weapons rely on sophisticated motors and actuators to steer them towards their targets. Fin actuators in missile guidance and control systems, which control the direction of the missiles, employ neodymium, praseodymium, samarium, dysprosium and terbium.

 

 

Stealth helicopters have neodymium magnets in their noise cancellation technology blades.

 

Cerium-based compounds are used for optical lenses encountered in the battlefield, while lanthanum is incorporated into cameras, telescopes and night vision goggles.

 

For a more complete list of REE military uses, visit our Rare earths in the cross-hairs of new high-tech arms race

 

All told, the Wicheeda rare earth deposit is a repository of rare earth elements that are ideal for the latest technologies - due not only to their uses in permanent magnets, found in everything from wind turbines to electrical vehicles to cruise missiles, but also for the REES, present at Wicheeda, that are needed for electric/ hybrid vehicle batteries, catalytic converters and sophisticated military equipment.

 

Conclusion

 

Defense Metals has a rare opportunity to move the Wicheeda rare earths deposit forward into a mine that has the potential to supply valuable rare earths for important military, civilian, industrial and clean energy purposes.

 

Cerium, lanthanum, neodymium and praseodymium values were reported in the press release detailing the assay results from a 30-tonne bulk sample.

 

Applications for these rare earth elements include cerium in catalytic converters; lanthanum in hybrid vehicles and oil refining; and most critically, neodymium/ praseodymium in permanent magnets.

 

DEFN is slowly proving the metallurgy and plans to scale its operation up. SGS is now conducting a multi-phase program of bench-scale metallurgical test work. The next step is to develop a flow sheet from a 200-kg sub-sample (from the 30-tonne bulk sample), to get 20 kg of REE concentrate. Then a pilot plant to test whether the original 30-tonne bulk sample can produce a concentrate at industrial scale. And finally, a hydrometallurgical test plant that can produce three tonnes of REE concentrate - enough for commercial use.

 

Each step that is successfully completed will provide more confidence for investors, and further de-risk the project.

 

Consider too, that several rare earth elements are difficult or impossible to replace; they have no substitutes. Yet these REEs, including those found at Wicheeda, are essential to the functioning of modern militaries and for feeding high-technology industries such as electric vehicles and renewable energies.

 

Any company outside of China that can reliably produce rare earth oxides will have no shortage of customers lining up for off-take agreements, nor suitors ready to make an acquisition once the elements in the ground and the metallurgy have been proven out.

 

Richard (Rick) Mills

aheadoftheherd.com

 

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified. Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as

to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

 

Defense Metals (TSX-V:DEFN) is an advertiser on Richard’s site aheadoftheherd.com. Richard owns shares of DEFN.


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