Milestones, ESG as an USP and the new openness of policy toward rare earths outside China - Defense Metals provides backgrounds

Within the past few years, we have doubled our resource and thus also the value of our deposit. The Wicheeda rare earths project stands for metallurgical results at a unique level. This has been demonstrated by the results of our flotation and hydromet work confirmed by recognized laboratories.

Defense is developing Wicheeda at a rapid pace with plans for a preliminary feasibility study in the first half of 2021. We have run 1200 kilograms of our high-grade concentrate through a pilot hydromet separation plant with outstanding results. We are also planning a drilling program in the summer to further upgrade and increase the size of our deposit.

The results indicate potentially commercially viable conditions. High concentrations are critical to the progress of any rare earth project. Within the past two years, we have completed and most recently fed our flotation pilot plant with flotation concentrate. The results have convinced both us and the market: recovery rates of more than 90% rare earths are another piece of the puzzle on the way to the economic viability of our project. Our next goals are the preliminary feasibility study and the completion of the hydrometallurgical pilot plant. Thanks to the recently completed test work, we were able to gain important insights into the framework conditions as well as the refining process. This will help us to optimize our refining process and reduce associated risks.

You could say that! We have already secured a small funding grant from public funds and just recently received two calls regarding the development of our Hydromet pilot plant from the government, which wants to be involved in further development. Governments in Canada and around the world are committed to ensuring a secure supply chain for rare earths, and Defense is the frontrunner in Canada for successful rare earth metallurgy.

Quite simply, if we are to enjoy high-tech components, electric vehicles and clean, sustainable energy, secure supply chains are essential. With China's growing economy and commitment to domestic production of electric vehicles, the country will become an importer of rare earths rather than an exporter in the not-too-distant future. China is capable of consuming more rare earths than it produces and then there will be nothing left for the rest of the world, as China is now responsible for 80% of the rare earths mined. This is a scary reality for industry in Western countries!

I think China is making efforts to improve its environmental performance, but I doubt it will ever meet Western standards. I think it is inevitable that many of the comforts of our lifestyle will become more expensive if, at the same time, we want to place great emphasis on clean sources of raw materials. This is also a political decision.

We are already seeing a development in the industry today that is moving in this direction. Modern technologies, such as blockchain, are predestined to make supply chains transparent. Ultimately, however, it is up to governments to push these developments and insist on compliance with standards. However, there is no denying that the trend is clearly moving in the direction of sustainability. Professional investors in particular have embraced this issue and are already incorporating it into their decisions. This in itself is causing a change in the industry.

It is impossible to ignore the defense issue. Each year, the U.S. spends about 1.2 trillion. USD on defense - at the same time China controls key components of defense production in the form of rare earths. When the U.S.'s fiercest rival plays such a dominant role in the international arena, something should be done urgently from the U.S. perspective. Already in the past, China has threatened to cut off companies, such as Haliburton or Lockheed Martin, from access to rare earths. This shows that China has long used rare earths as a weapon. It is therefore highly likely that the U.S. will respond by securing its own supply of rare earths. For Defense Metals, this is a great opportunity. Incidentally, I don't believe that sustainability and the use of raw materials for the defense industry have to be mutually exclusive. You can supply rare earths to the defense industry and still produce according to high environmental and social standards. Compared to today's conditions in many rare earth mines, most of which are located in China, that would already be a big step forward.

At the moment, our balance sheet is stronger than ever and we are continuously receiving funds from warrants. If we were to go to the capital markets, it would definitely not be for a large amount, as our pilot and drilling costs are low and we expect government subsidies.

As CEO of Defense Metals, it's not my place to value other companies. However, the IPO of USA Rare Earth is an extremely positive signal for the industry and draws attention to us as well. Whenever there are different valuations in the market, market mechanisms ensure that valuations converge. Talking to independent analysts over the past few weeks, I have gained the impression that the market could value Defense Metals in a similar way to USA Rare Earth at present.

There are various analysts and also some experts who have been following rare earths for many years. At present, there is much to suggest that the upswing in rare earths is not a flash in the pan and will continue, unlike in 2010. The reason lies in the global trend towards green technologies. China's dominant market position has also led to a change in political thinking. This should additionally favor mining projects such as that of Defense Metals. Regardless of the rare earth market, those projects that can score with low costs will ultimately prevail. Our Wicheeda rare earth project shines with a unique infrastructure. This will be the key to our being able to report lower costs compared with competitors. Coupled with the expected long-term supply shortage of rare earths, this is a good environment for Defense Metals shareholders.