Nechalacho REE

Location

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Thor Lake,
NWT

Project Phase

Feasibility Study

The Nechalacho Rare Earth Elements Property, located at Thor Lake, Northwest Territories, is a rich polymetallic rare metals resource, with potential for economic recovery of the rare earth elements (REE), lithium, zirconium, beryllium, niobium and tantalum. Avalon initially focused its work on the heavy REE-rich Basal Zone deposit (2008-2013), which was the subject of the company's positive 2013 Feasibility Study

The presence of other high grade, near surface light rare earth resources enriched in neodymium-praseodymium (Nd-Pr) in the T-Zone and Tardiff Zones of the property provide the potential for near term, small scale development to produce Nd-Pr-rich concentrates for export. In June 2019, Avalon and Cheetah Resources Pty Ltd. signed a purchase and sale agreement under which Cheetah would acquire ownership of the near-surface T-Zone and Tardiff Zone resources for C$5 million. 

Avalon retains its ownership of the mineral resources below a depth of 150 metres above sea level (including the Basal Zone deposit) and will continue to have access to the property for exploration, development and mining purposes. Avalon will also continue to assist Cheetah where needed in executing its planned work programs and retain its 3% NSR type royalty.

Strategic Advantages

Geology

  • Large Basal Zone deposit enriched in the heavy rare earths
  • Near-surface mineralization of neodymium and praseodymium (T-Zone, Lake Zones)
  • Low uranium and thorium levels
  • Lithium potential through the mineral lepidolite in the South T deposit

Accessibility

  • Thor Lake has good access through its proximity to Great Slave Lake, providing access by barge in the summer and ice roads in the winter
  • Located just 100 km southeast of Yellowknife
  • Hay River is a nearby port with existing barging terminal and railhead accessible year round by an all-season highway
  • A proposed expansion of hydro power generation and transmission capacity potentially offers Nechalacho a low-cost alternative to diesel-generated power at site

Sustainability

  • Basal Zone extraction and processing facilities have been designed to significantly minimize impacts to water, land and air and reduce the project’s carbon footprint
  • T-Zone and Tardiff Zones provide the potential for small scale, staged development to produce Nd-Pr-rich concentrates for export
  • Proactive community outreach initiatives including progressive Indigenous agreements
  • Focus on strong health and safety performance reduces potential for delays and extra costs from lost time injuries

Reduced Risk

  • Politically stable jurisdiction
  • Polymetallic rare metals resource with potential for multiple projects, revenue streams and by-products

Location

The Nechalacho property is located at Thor Lake in the Mackenzie Mining District of the Northwest Territories, approximately 100 km southeast of the city of Yellowknife. The property is comprised of five contiguous mining leases totalling 10,449 ac (4,249 ha) and three mineral claims totalling 4,597 ac (1,860 ha).

Thor Lake Area and Regional Infrastructure
Thor Lake’s Regional Infrastructure

Indigenous Agreements

In 2012, Avalon signed its first Accommodation Agreement with the Deninu K’ue First Nation. A similar Participation Agreement was signed with the Northwest Territory Métis Nation in February 2014. The Agreements include measures to mitigate environmental and cultural impacts that may result from the Project’s development. Implementation committees meet during periods of project activity to review Agreement commitments, work on joint-projects and share updates about their respective organizations.

Negotiations continue intermittently on various forms of partnership agreements with other Indigenous governments including the Lutsel K’e Dene First Nation, North Slave Métis Alliance, Yellowknives Dene First Nation, Tlicho Government and K’atl’odeeche First Nation. These negotiations have been conducted in a spirit of mutual respect and collaboration.

 

Property Timeline

  • 2005-07: Avalon acquired the property and completed an initial compilation on the North-T deposit, which included recognition of a small, high grade, neodymium resource in the F-Subzone, averaging 6.5% Total Rare Earth Oxides including 1.5% Nd2O3.
     
  • 2011: MVEIRB started the Environmental Assessment process; Avalon submitted a Developers Assessment Report (otherwise known as an Environmental Impact Statement), on May 20, 2011
     
  • June 2012: Signing of Accommodation Agreement with the Deninu K’ue First Nation
     
  • 2008-13: Discovery and definition of the Basal Zone heavy REE resource led to preparation of a positive Feasibility Study contemplating large scale production of a mixed rare earth precipitate and enriched zirconium concentrate, containing by-products tantalum and niobium
     
  • November 2013: Approval of Environmental Assessment by the Federal Government
     
  • February 2014: Signing of Participation Agreement with the Northwest Territory Métis Nation
     
  • March 2014: Strategic partnership / refining agreement with Solvay for refining of rare earths (mutually terminated in February 2016)
     
  • April 2014: Receipt of Land Use Permit for pre-construction work
     
  • May 2014: Receipt of Water Use License for pre-construction work

    [Project put on hold following dramatic decline in REE prices]
     
  • 2018: Due to rising prices for Nd-Pr, Avalon completing a field program to begin assessing the near term, small scale development potential of the T-Zone and Tardiff Zones as a source of Nd-Pr rich bastnaesite concentrates. Sampling was also done in the T-Zone to begin assessing its lithium potential due to widespread occurrence of the lithium mica polylithionite.
     
  • 2018/2019: Following the receipt of the new Exploration Type B Land Use Permit in June 2018, Avalon also received approval for the extension of its existing Land Use Permit and Water License for the first year of site preparation and preliminary low impact construction activities in 2019.
     
  • 2019: Avalon and Cheetah Resources Pty Ltd. signed an agreement under which Cheetah would acquire ownership of the T-Zone and Tardiff Zone resources for C$5 million, with Avalon continuing to assist Cheetah with its work programs. Avalon retains ownership of the mineral resources below a depth of 150 metres above sea level (including the Basal Zone deposit that was the focus of Avalon's positive 2013 Feasibility Study) and will continue to have access to the property for exploration, development and mining purposes. A co-ownership agreement is presently in preparation.

 

2013 Feasibility Study Highlights

On April 17, 2013, Avalon announced the completion of a positive Feasibility Study on the Basal Zone of its Nechalacho property. The Feasibility Study was prepared by SNC-Lavalin Inc. and was the first feasibility-level study to be completed on a major heavy rare earth project outside of China. The results confirmed that the Basal Zone on the Nechalacho property is technically feasible and economically robust as a producer of the heavy rare earth elements. 

  • The discounted cash flow analysis yielded a 22.5% internal rate of return (“IRR”) on a pre-tax basis and a 19.6% IRR on an after-tax basis, assuming 100% equity financing. The project’s net present value at a 10% discount rate was calculated at $1.351 billion pre-tax and $900 million after-tax.
     
  • Total project construction capital costs were estimated at $1.575 billion, which included a 13% contingency and $122 million in sustaining capital. 
     
  • Operating costs were estimated at $264.5 million per year, while revenues were estimated at $645.8 million per year using price assumptions developed in 2011-12. With these assumptions, revenues of $456.5 million from separated rare earth oxides (“REOs”) and $189.3 million from the sale of an enriched zirconium concentrate were calculated.
     
  • Sales of the five critical REOs (neodymium, europium, terbium, dysprosium and yttrium) accounted for over 82% of the separated REO revenues, while lanthanum and cerium sales represented less than 4.5% of total revenues.
     
  • Total Measured and Indicated Mineral Resources would be sufficient to support continued mining operations at Nechalacho for many decades beyond the assumed 20 year mine life, assuming Mineral Resources can be continuously converted to Mineral Reserves during operations.
     

Further Information

NI 43-101 Technical Report – Nechalacho Feasibility Study