Defense Metals (TSX-V: DEFN)(OTC: DFMTF) CEO Craig Taylor on Release of First-Pass PEA on Flagship Wicheeda Rare Earth Project, British Columbia, Canada
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Defense Metals — Mr. Craig Taylor. Craig, congratulations are in order. You just announced your first PEA for your rare earth project. It's got to feel great! How are you doing?
Craig Taylor: Really good, Gerardo. Thank you for that. Yeah, it's been a long time coming. We've had a team at SRK and SGS and Defense working really hard on this for a lot of months.
Gerardo Del Real: SRK is known to me for over a decade now to do very, very quality work. So when I see an after-tax net present value of C$512 million using an 8% discount rate and I look at operating margins of 65.2% — that's got to be extremely encouraging for what's a sneak peek, right?
This is really just a first-pass study to work off of and build on. So let's go over what, I would say, let me play devil's advocate and say, obviously, the net present value is many multiples of your current market cap right now, right? The operating margins are phenomenal.
The fact that you're near key infrastructure; big advantage in the space. The one knock that I would say could be articulated is the after-tax IRR at 16%. Are there opportunities to improve that because the rest of this looks, at first pass, pretty darn good.
Craig Taylor: Yeah, I think all of these numbers are going to improve in the future. We've completed our 5,000 meter drill program. That's going to upgrade our categories. It's going to affect the discount rate that we've had to absorb here. And as you said, it's a sneak peek; it’s a plan. And we've already got plans to up these numbers and do work to optimize.
Gerardo Del Real: Excellent! Let's talk about the production potential. Walk me through what you envision. You talk about a 16-year life of mine, right? Obviously, I'm assuming that there's potential to increase that as well, right?
Craig Taylor: Yeah, there is. And I think that our drill program is going to do that. That wasn't the objective to increase the resource by tonnage… it was more infill to upgrade our categories. But we will, obviously, have some extra tonnage as well.
So we could move up to a 17, 18, 19-year mine life with a throughput of 1.8 million tonnes a year. And we'll start that on a concentrate basis similar to what Mountain Pass did. And we'll be able to fund our hydromet plant within year four.
So that's the objective there. It's worked very well for them. And keep in mind, the prices that we're using are based on the last three years' average pricing. If we use today's spot pricing for neodymium and praseodymium — our numbers would be staggering.
We expect those numbers to grow in the future, of course, with the EV explosion and everything we've talked about in the past. So I think the wind is at our backs here for sure.
Gerardo Del Real: I like that you were conservative in your pricing assumptions. It's always better to start conservative and work your way up if the market is favorable. Clearly, the market is favorable right now, and that doesn't seem like a trend that's going to slow down anytime soon.
It was curious to me that Dr. Luisa Moreno commented about the three main aspects required for a successful rare earth project and the fact that Defense Metals has that in spades. Can you speak to that a bit?
Craig Taylor: Yeah, and she's excellent. She's been an analyst for years. She's an engineer with a PhD. So we have the metallurgy; we have the tonnage; we have the infrastructure.
And when you were looking at mines like this in the past, we were talking billion dollar CAPEXs. And for us to keep it down to just over C$400 [million] is very relevant. And again, SGS was instrumental in getting this together. They are conservative, but they're also very well-respected. So these numbers are easily built on, and they're trusted worldwide.
Gerardo Del Real: Well done. Great work. I know that you're hoping to have another resource update here soon, as well as update the geologic model. How's that coming along?
Craig Taylor: Yeah, very well. We finished our 5,000 meter drill program. We've sent away for assays, and those will be out Q1 of 2022. And I think the plan forward — as suggested by SGS and a lot of their metallurgists as well as SRK — is we'll do the hydromet plant… that pilot plant we've been talking about… but we've narrowed that down and we know exactly what tests are to be done.
So we will finish this drill program, get our assays, update the resource, probably drill again in the spring, finish our hydromet plant, and work towards prefeasibility Q4 of 2022.
Gerardo Del Real: Excellent. I assume that discussions are ongoing with potential take-off partners and strategic partners.
Craig Taylor: Yeah, and a lot of them were waiting for this day — us getting our PEA done. So we have all sorts of calls set up over the next several weeks with institutions, with off-take partners, with potential strategic partners. Everyone is very excited about the results we've seen today.
Gerardo Del Real: Craig, congrats! Let's chat again soon. It was overdue. Thank you again for your time.
Craig Taylor: Okay, thanks, Gerardo.
Gerardo Del Real: Alright, take care now. Chat soon.