VANCOUVER, BC , Nov. 24, 2021 /CNW/ - Defense Metals Corp. (" Defense Metals " or the " Company ") (TSXV: DEFN) (OTCQB: DFMTF) (FSE: 35D) is pleased to announce the results of its Preliminary Economic Assessment (PEA) and updated mineral resource estimate for the development of its Wicheeda Rare Earth Element (REE) deposit located in British Columbia, Canada . The PEA was prepared by SRK Consulting ( Canada ) Inc. (SRK). The effective date of the PEA is November 21, 2021 and a technical report relating to the PEA will be filed on SEDAR within 45 days of this news release.

PEA Highlights

Strong Financial Metrics

• The project has a pre-tax net present value (NPV) of $765 million ¹ , and after-tax NPV of $512 million , at 8% discount rate.
• The pre-tax internal rate of return (IRR) is 20%, and the after-tax IRR is 16%.
• The capital payback is 5 years from start of production, and assumes partial self-funding of construction of hydrometallurgical plant from concentrate sales.
• Revenues average $397 million per year from sale of REE mineral concentrate (years 1-4) and mixed REE hydrometallurgical precipitate (years 5-16).
• Operating margin of 65.2%.
• Production of a saleable high-grade flotation-concentrate, with average 43% total rare earth oxide (TREO) for the life of the mine. It will be sold to market directly for years 1-4 and will then feed a project hydrometallurgical plant starting in year 5.
• Project near to key infrastructure.
• Base case economics were calculated using rare earth oxide (REO) prices of US$5.76 /kg TREO in flotation concentrate and US$14.04 /kg TREO in mixed REE carbonate precipitates.

Significant Production Potential

• The study contemplates a 1.8 Mtpa (million tonnes per year) mill throughput open pit mining operation with 1.75:1 (waste:mill feed) strip ratio over a 19 year mine (project) life that includes 3 years of construction, and early revenue generation via phased open pit development. Phase 1 initial pit strip ratio of 0.63:1 (waste:mill feed) yields rapid access to higher grade surface mineralization. Pre-production and first mill feed both in year 1.
• Average annual REO production of 25,423 tonnes.
• Operating costs average $137 million per year over a 16-year life of mine (LOM).

Development Capital

• Initial capital expenditures (CAPEX) are $461 million (includes a contingency allowance of 20% to 25% for major items), and the expansion capex under a cash-funded scenario is $474 million . Sustaining capex for the life of the project is $401 million .
• A scenario that uses concentrate sales to partially self fund the construction of a hydrometallurgical plant reduces overall project cash requirements compared to constructing the hydrometallurgical plant as part of Phase 1. This development scenario provides significant optionality to accelerate or defer the investment in the hydrometallurgical plant according to market conditions.

Mineral Resource Estimate

• The updated Wicheeda Mineral Resource Estimate (MRE) comprises a 5.0 million tonne Indicated Mineral Resource, averaging 2.95% TREO and a 29.5 million tonne Inferred Mineral Resource, averaging 1.83% TREO, reported at a cut-off grade of 0.5% TREO within a conceptual Lerchs-Grossman (LG) pit shell. The current resource represents a 36% increase on a contained metal basis in comparison to the prior 2020 MRE due to the estimation of additional economically significant medium and heavy REE's and a lower cut-off grade established based on consideration of TREO and concentrate payable, metallurgical recovery, and operating cost assumptions.

Exploration Upside

• During 2021, in anticipation of a positive PEA outcome, Defense Metals completed a 29-hole 5,349 metre resource expansion and delineation diamond drill program at Wicheeda. The results of drilling are expected during Q1 2022 and as such have not been incorporated into the PEA. The drilling is expected to support ongoing advanced economic studies through the development of an updated geological model and mineral resource estimate.

Craig Taylor , CEO of Defense Metals, stated: "We are pleased to have delivered a positive PEA for the Wicheeda REE Project that has the potential to be one of the top REE projects in the world. We chose SRK due to its world class experience and reputation in the mining industry and in particular its ability to assemble a team with highly specialized knowledge of Rare Earth Elements projects. The results of the PEA reveal the Wicheeda Project demonstrates robust economics and relatively low initial CAPEX via a staged development scenario that provides the flexibility to capitalize on forecast REE demand pressure."

Dr. Luisa Moreno , Director, added: " The Wicheeda project has the three main aspects for a successful rare earth project, favorable minerology dominated by coarse grained bastnasite family minerals, a metallurgical process that yielded high grade flotation concentrate and great infrastructure in a friendly jurisdiction. With the positive PEA, the project is undoubtedly a step closer to production."

PEA Key Metrics

Table 1: Key financial and project metrics

Optimization Opportunities and Next Steps

The PEA describes a well-developed base case flotation concentration and hydrometallurgical pre-leach-caustic crack-leach flowsheet capable of achieving high REE recoveries into a mixed REE precipitate product. The base case represents a well-proven and widely adopted REE recovery flowsheet.

There are several alternative process and infrastructure development options that have shown promise in initial testing or based on the characteristics of Wicheeda REE feed are expected to be viable, that have the potential to yield simplifications that may contribute to decreased CAPEX and/or operating costs (OPEX). Future critical path bench and/or pilot-scale testwork and economic trade-off, and resource estimation studies are planned which include (but are not limited to):

• Economic trade off studies designed to investigate the optimal hydrometallurgical plant location. CAPEX/OPEX reduction may be achievable in siting the hydrometallurgical plant more remote from the project site near industrial reagent suppliers versus the base case.
• Front-end investigation of pre-concentration (e.g., x-ray transmission (XRT) particle sorting) and flotation flowsheet metallurgical optimization assessing the effect of grind size and lowered or alternative reagent dosages, as well required conditioning and flotation slurry temperature.
• Hydrometallurgical optimization including investigation of potential process alternatives including direct caustic crack, sulphuric acid bake.
• During 2021, in anticipation of a positive PEA outcome, Defense Metals completed a 29-hole 5,349 metre resource expansion and delineation diamond drill program at Wicheeda. The results of drilling are expected during Q1 2022 and as such have not been incorporated into the PEA. The drilling is expected to support ongoing advanced economic studies through the development of an updated geological model and mineral resource estimate.
• Further metallurgical test work to confirm and improve recoveries and better define detailed design parameters such as liquid-solid separation requirements.
• Further definition of the detailed characteristics of the tailings and water management components.
• Engage with rights and stakeholders.
• Design and implementation of a full environmental base line program in support of Federal and Provincial Environmental Assessment for the project.
• Future infill and expansion drilling.

Updated Mineral Resource

The Wicheeda deposit is modelled as a southeast-trending, north to northeast dipping composite layered syenite-carbonatite sill complex having dimensions of approximately 400 m north-south by 100- 250 m east-west. The mineralization is interpreted as a moderately north-northeast dipping, shallowly north plunging, layered sill complex having low REE grade syenite at its base, overlain by transitional intermediate REE grade hybrid xenolithic-carbonatite (fenite), and finally relatively higher REE grade dolomite-carbonatite rocks, which form the main mineralization of the Wicheeda REE deposit outcropping at surface.

The updated MRE comprises a 5.0 million tonnes Indicated Mineral Resource, averaging 2.95% TREO (Total Rare Earth Oxide: CeO ₂ , La ₂ O ₃ , Nd ₂ O ₃ , Pr ₆ O ₁₁ , Sm2O3, Eu ₂ O ₃ , Gd ₂ O ₃ , Tb ₄ O ₇ , Dy ₂ O ₃ and Ho ₂ O ₃ ), and a 29.5 million tonnes Inferred Mineral Resource, averaging 1.83% TREO, reported at a cut-off grade of 0.5% TREO within a conceptual Lerchs-Grossman (LG) pit shell and is provided in Table 2.

The lower cut-off grade was established based on consideration of TREO and concentrate payable, metallurgical recovery, and operating cost assumptions.

The MRE is predominately based on an unchanged geological model and methodologies utilized to calculate the 2020 MRE. Differences relate to the incorporation of pulp REE multi-element fusion inductively coupled plasma mass spectrometry (ICP-MS), re-assay of the 2008 and 2009 drillholes, reducing the uncertainty regarding the historical incomplete X-ray fluorescence analytical results, updated estimation parameters, and a 2020 LiDAR survey. The increased resolution of the LiDAR allows for more robust mine planning, particularly when considering the high relief within the Project area.

Table 2: Wicheeda Mineral Resource (effective date November 21, 2021 )

Notes for Resource Table:

• The MRE was prepared by Warren Black , M.Sc., P.Geo. of APEX Geoscience Ltd under the supervision of the QP, André M. Deiss, Bsc (Hons), Pri.Sci.Nat. of SRK Consulting ( Canada ) Inc. , in accordance with CIM Definition Standards.
• The MRE is classified according to the CIM "Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines" dated November 29th, 2019 and CIM "Definition Standards for Mineral Resources and Mineral Reserves" dated May 10th, 2014 .
• Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability . There is no guarantee that any part of the mineral resources discussed herein will be converted to a mineral reserve in the future.
• All figures are rounded to reflect the relative accuracy of the estimates. Total may not sum due to rounding.
• Mean rock densities supported by 795 measurements applied: 2.94 g/cm3 (dolomite-carbonatite), 2.87 g/cm3 (xenolithic-carbonatite), 2.70 g/cm3 (syenite), and 2.74 g/cm3 (limestone).
• The reasonable prospect for eventual economic extraction is met by reporting the Mineral Resources at a cut-off grade of 0.50% TREO (total rare earth oxide, sum of 10 oxides: CeO ₂ , La ₂ O ₃ , Nd ₂ O ₃ , Pr ₆ O ₁₁ , Sm ₂ O ₃ , Eu ₂ O ₃ , Gd ₂ O ₃ , Tb ₄ O ₇ , Dy ₂ O ₃ and Ho ₂ O ₃ ) , contained within a Lerchs-Grossman (LG) optimized pit shell
• The cut-off grade is calculated, and the LG pit is optimized based on the assumption that the hydrometallurgical processes can produce mixed REE carbonate precipitates. The parameters utilized include the following considerations:
• TREO price: $18.66 /kg
• Exchange rate of 1.30 C$ :US$
• Precipitate production grades of 81.09% of TREO
• Processing cost includes $21.47 /t of mill feed for flotation plus a variable cost for hydrometallurgical plant that varies based on the feed grade. The average cost of hydrometallurgical plant is assumed to be $1,204 /t of concentrate.
• Mining cost of C$2.00 /t for mill feed and waste
• G&A Costs included in the processing cost is C$6M /yr
• The overall process recoveries: For TREO>=2.3%, recovery is 69.6%; between 2.3% and 1.5% TREO, recovery is 65.3%; and less than 1.5% TREO, recovery is 52.2%. These assume variable flotation recoveries and a constant 87% hydrometallurgical recovery.
• Overall pit slope angles vary by zone between 40 and 48 degrees

The PEA for the Wicheeda REE Deposit is preliminary in nature, includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment forecasts will be realized or that any of the resources will ever be upgraded to reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Mineral Resource Estimate Methodology

1. The drillhole database comprised of 27 exploration diamond drillholes completed in 2008 and 2009 by previous operators (14 holes totalling 2,244 metres) and in 2019 by Defense Metals (13 holes totalling 2,005 metres), containing a total of 1,315 drill core samples analyzed for REE by multi-element fusion ICP-MS.
2. The 3D geological modeling integrates assay and geological data collected from diamond core drilling; surface geologic mapping; soil geochemical; and airborne magnetic; and radiometric geophysical surveys.
3. Search ellipsoids defined by metal modelled variograms, which range from 130 to 140 m in the major axis, 100 m in the minor axis, and 9 to 18 m in the vertical axis. The MRE was estimated with 3 m composites utilizing Ordinary kriging and local varying anisotropy.
4. Indicated Resources were categorized within a search ellipse of 90 m by 60 m by 9 m with a minimum of 5 drillholes. Inferred blocks do not extend beyond the limits of the variograms.

Table 3: Mineral Resource cut-off sensitivity