Avalon aims to capture a five to 10 per cent share of the global rare earths market. It is headquartered in Toronto (AVL:TSX) and also trades as AVL:NYSE MKT.
Avalon intends to become the leading outside-of-China supplier of heavy rare earths and other rare metal and mineral products to the global market. Its flagship project is the 100-per-cent-owned Nechalacho Deposit at Thor Lake in Canada’s North West Territories (NWT).
Nechalacho is emerging as one of the largest undeveloped rare earth element resources anywhere. It is exceptionally enriched in the ”Critical 5” rare earth elements (neodymium, europium, terbium, dysprosium and yttrium), which are key to enabling advances in green energy technology and other growing high tech applications. It is one of the few potential sources of these vital elements outside China.
President and CEO of Avalon is Don Bubar, who is encouraged by his company’s opportunities, “With Nechalacho being the most advanced project outside China, there is an opportunity for us to be first to market and become the leading new supplier of heavy earths from outside China. This is our goal.”
Work to date
While exploring and developing Nechalacho, Avalon has invested over $90 million and over 100,000 metres of drilling had been completed by May 2013. The latest resource estimation update showed Measured and Indicated Mineral Resources in the prospect’s basal zone as 65.83 Mt, grading 1.57% Total Rare Earth Oxides (TREO) and 21.86% Heavy Rare Earth Oxides/Total Rare Earth Oxides (HREO/TREO), using the base case $320/t NMR cut-off. At the $800/t NMR cut-off there are an estimated 18.57 Mt of resources grading an impressive 2.2% TREO and 25.8% HREO/TREO. The deposit also contains significant by-product rare metals, tantalum, niobium and zirconium.
The Thor Lake rare metals deposit is hosted by the peralkaline Blachford Lake intrusion, an Aphebian-age ring complex emplaced in Archean-age supracrustal rocks of the Yellowknife Supergroup. Principal rock types in the intrusion are syenites, granites and gabbros and associated pegmatitic phases hosting rare metal mineralization.
The host of the Nechalacho mineralization, the nepheline-sodalite syenite, is within and below the Thor Lake Syenite, and is exposed locally in the north west part of the Thor Lake Syenite. Key features are: a distinct chemical composition showing under-saturation in quartz, cumulate layering, agpaitic zircono-silicates including eudialyte, and hosting of zirconium-niobium-tantalum-rare earth mineralization.
Five distinct deposits of rare metal mineralization have been identified as being of potential economic interest: the Nechalacho deposit (historically known as the Lake Zone) which is currently top priority due to its large size and enrichment in REE (the smaller North T, South T, S and R zones are not currently being worked by Avalon).
Nechalacho, a tabular hydrothermal alteration zone, often extends to 200-250 m depth, and is characterized by alternating sub-horizontal layers of relatively high and lower grade REE mineralization. HREE are present in the Nechalacho deposit in fergusonite ((Y,HREE)NbO4) and zircon (ZrSiO4), whereas the lighter earths are to be found in bastnaesite, synchysite, allanite and monazite.
There is a gradual increase in HREE from the surface down to the basal zone. Typical proportions of HREO to TREO in upper zones can be 7-10% but in the basal zone the average is over 20% and as high as 50% in individual samples. There is also a tendency for the basal zone HREO grade to increase with depth and the highest grades are found in a basinal structure along the south west side of the deposit.
Sustainability and CSR
Nechalacho is situated in an area known as the Akaitcho Territory which is subject to a comprehensive land claim negotiation between several communities of the Dene Nation and Canada’s federal government. Avalon has been proactive in engaging with local aboriginal communities with a view toward sharing the benefits through partnership agreements.
Don Bubar is acutely aware of the importance of community engagement and embracing the principles of sustainable development generally. Indeed, he notes that, “There are lots of large companies needing HREEs, that conduct audits of their supply chains right back to the sources of raw materials and insist that all their suppliers adhere to the same principles of sustainability that they do.”
Avalon has taken a multi-dimensional approach in terms of the environment and working with local communities; in 2010 it received PDAC’s 2010 Environmental and Social Responsibility Award. In 2011, three different MOUs were signed with the Akaitcho First Nations, leading to a future cooperative partnership for the Nechalacho deposit.
In June 2012, Avalon entered into an accommodation agreement with the Deninu K’ue First Nation. The company is now actively consulting with the four nearest Akaitcho Dene communities with a view toward implementing a co-operative development approach for the Nechalacho’s rare earths.
Confident with good reason
Avalon has had several challenges to confront. There was the sheer complexity of processing data. Seven years have passed since exploration started at Thor Lake, and expenditures have reached over $90 million. Although Avalon was in a unique position seven years ago, the surge of interest in rare earths three years ago attracted lots of competitors but with a four year head start Avalon remains far more advanced than most of its competitors.
Don Bubar again, “Heavy rare earths are vitally important to many industries including automotive, electronic and clean technology, but we have to develop the markets for our products directly with consumers. We need off take commitments before we can raise capital to commence construction. While we have $15 million in our treasury and no debt we need over $1.0 billion in hand before we can begin construction toward a production start date in 2017. In the interim, there is a lot to do to optimize the project, to reduce costs and to improve profitability.”