Defense Metals (DEFN.V) has initiated the baseline surface water assessment studies on its Wicheeda REE project in British Columbia. This is a necessary step in preparation of advancing the project towards the permitting phase in case a feasibility study will confirm the economics of the REE deposit. Defense is working very methodologically and published an updated resource estimate on Wicheeda during the second quarter and looking at the grades and anticipated recovery rates (based on recent metallurgical test work), the PEA should yield positive economic results. Before the PEA can be initiated, Defense will be waiting for the results of the pilot plant which should complete the first few trial runs later this month.
Unfortunately the company’s share price experienced a weak June and after initially closing a C$1M tranche of a previously announced private placement, the appetite for a second tranche was low as the share price dropped to around C$0.15 on the open market, well below the C$0.25 and C$0.20 prices of the Flow-through and hard-dollar units. The second tranche consisted of just C$40,000 (equally divided between the flow-through and hard dollar placement) and although this amount is clearly negligible, every dollar counts at this stage.
Despite having issued about 9 million shares and warrants, the impact on the diluted share count will remain manageable. 3.9 million warrants with a strike price of C$0.30 expired in June while an additional 3.8M warrants with a same strike price will be expiring in September of this year. Although it would be desirable to see these warrants end up in the money odds are those will expire out of the money as well.
The current market capitalization remains below C$10M and hopefully the company will get some more love from the market once the final results of the pilot plant are in. It’s also important to note the owners of the Mountain Pass project in California will bring the company public again. It will be interesting to see the detailed business plan and whether or not Mountain Pass will rely on third party mineral concentrate to keep its processing plant filled.
Disclosure: The author has a long position in Defense Metals. Defense currently is not a sponsor of the website, but could become one.
