The war in Europe is here and with that comes challenges for the global energy supply. A worldwide squeeze has pushed the price of gas up to unprecedented levels: a cold winter in Europe in 2020/21 put pressure on supplies and reduced the amount of gas stored, a relatively windless summer in 2021 made it difficult to generate wind energy. These factors along with the sanctions on Moscow and a flood of divestments from Russian oil assets have prompted energy to surge.
Back in 2018, CEO Craig Taylor was made aware of the Defense Metals (TSXV: DEFN) project, it’s assets and the team around it. Jumping with enthusiasm about this project, Craig quickly jumped on board to take the helm of this ship. The first thing that caught his eye was the Wicheeda project, a fantastic rare earth metal deposit located in one of the best mining districts in the world in British Columbia. Surrounded in a strategic location with a major hydroelectric powerline, a major gas pipeline and a Canadian National Railway right beside them, the project couldn’t be in a better place. With a team consisting of individuals who have had years of experience both in the geological aspect of the mining industry and the corporate side, everything seemed to be set in place for Defense Metals.
Not Quite The Right Time
With everything in place, it seemed only a matter of time before Defense Metals stock would start to rise. However, as history shows us, there are some things we can’t control. At that time, rare earth metals were at a low coming off one of their worst years in history in 2016 which carried on until 2019, when rare earth metals saw some hope until that was quickly shot down again.
Things Are Starting To Lineup
Rare earth metals are being used in sustainable energy applications such as wind power generation and electric vehicles everyday. More and more they are being used as an energy source for the future.
Europe imports 40 percent of its natural gas from Russia, and many states have significant trade and investment exposure to Russian markets. As I had previously mentioned, tensions between Russia and Ukraine have led to serious measures that have resulted in a war. Because of this, worries of global shortages prompted traders to drive up the price of oil to new multi year highs on Wednesday while European prices for natural gas skyrocketed to record levels.
“Even with Russian and Ukrainian factions meeting at the border to discuss a military ceasefire, the fragile situation in Ukraine and financial and energy sanctions against Russia will keep the energy crisis stoked and oil well above $100 per barrel in the near-term and even higher if the conflict escalates further,” - Louise Dickson, senior oil market analyst at Rystad Energy
However, Oil isn’t the only energy source to benefit from the Russia-Ukraine conflict. With the oil supply being instrumentally shortened, other energy sources stand to benefit as a substitute.
China’s Market Dominance
In times of crisis like now, the urgency in the availability of strategic metals becomes very evident. China is the world’s largest rare earth metal producer and has dominantly controlled leadership of this market for a long duration of time.
The North American governments have made this energy deficit a top priority with China, meaning that any available and future resource will be highly valued. Given the geopolitical tensions in the world right now, the U.S and Canada are looking for other alternatives outside of China to discover rare earth metals.
An electric vehicle (EV) uses 1kg to 3kg of neodymium-iron-boron (NdFeB) magnets in standard drivetrain motors. NdFeB magnets are in 93% of all electric vehicles. Tesla, GM, Ford, VW, Hyundai, Toyota and others build vehicles using these magnets. Every ten million new EVs require ~10,000 tonnes of additional neodymium or ~20% of current annual global supply. Over 70 million electric vehicles are expected to be sold when internal-combustion-engine vehicles are phased out.
The EV market is anticipated to grow from USD 287.36 billion in 2021 to USD 1,318.22 billion in 2028 at a CAGR of 24.3% in the 2021-2028 period. Considering Neodymium is one of the main metals in the Wicheeda project, this favors Defense Metals.
The Icing On The Cake
Defense Metals is currently underway with their drill programs at the Wicheeda project. Today, they announced results for an additional two diamond drill holes totalling 324 meters from the company’s 29 holes. The two infill holes intersected the highest grade REE mineralization to date at Wicheeda with drill hole WI21-38 returning 6.01% TREO over 23.4 meters and significant widths of mineralization above the 0.5% TREO (total rare earth oxide).
With Defense Metals current drill programs in place, the geopolitical crises and the EV revolution, I am certainly keeping a close eye to see what this stock does.
You can check out defense metals at their website https://defensemetals.com/
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By Matthew Nelson
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Defense Metals. is a high-risk venture stock and not suitable for most investors. Consult Defense Metals SEDAR profiles for important risk disclosures.