Bulletins

INDUSTRY BULLETIN: US Government to support creation of new North American Rare Earths Supply Chain

August 7, 2019


American President Donald Trump issued an Executive Order to encourage the creation of a North American rare earth supply chain to reduce reliance on China, in December 2017. Stating rare earth materials are “essential to national defense,” Trump issued the Order under a provision of the Defense Production Act of 1950: a broad law that authorizes the president to allocate materials and other services to promote and support American defense.

The United States’ Department of Defense is now conducting a wide assessment of North America’s critical infrastructure supply chains, including the main barriers to market experienced by domestic business. As the Request for Information (RFI) states, “the domestic industrial capability to provide critical materials for use in essential citizen applications is vital for national security.” The department will use the information gathered to propose recommendations for a healthy manufacturing and defense industrial base, including potential government investment in relevant projects.

Avalon Advanced Materials has submitted a proposal in response to the department’s RFI (which included Canada as a “domestic” source) to conduct further work on identifying more efficient extraction technologies for rare earths. As part of the submission, Avalon also pointed to two main barriers to entry for domestic rare earth extraction projects: access to venture capital and lengthy project permitting timelines.

Most mineral development companies operating in North America are publicly traded and rely on equity markets for raising venture capital. For non-exchange traded commodities that lack visibility on pricing, like rare earths, raising capital can be challenging for junior companies. Consequently, junior companies need to find strategic investors (such as government bodies) that understand the market and can provide confidence to other equity investors that the investment opportunity is real.

In addition to continuing to work with new partner Cheetah Resources Pty Ltd. to advance Avalon’s Nechalacho rare earth elements property in the Northwest Territories, Canada, Avalon is also looking at other rare earth project opportunities in North America to take advantage of renewed interest in the sector.

China supplies approximately 80% of the world’s rare earth elements, and the US defense industry relies heavily on China’s rare earth reserves for military technology, raising concerns of depending on a competitor nation for materials so vital to national defense. In the meantime, the “trade war” continues, with the US announcing on August 1 a new 10 percent tariff to be implemented by September. China retaliated by ceasing to purchase American agricultural products and stopped defending the yuan to keep it above the seven-to-one exchange rate with the American dollar, further increasing tensions.

For more information, please visit the company’s website at www.AvalonAM.com; or, for questions or feedback, email Avalon at ir@AvalonAM.com.

About Avalon Advanced Materials Inc.

Avalon Advanced Materials Inc. is a Canadian mineral development company specializing in niche market metals and minerals with growing demand in new technology. The Company has three advanced stage projects, all 100%-owned, providing investors with exposure to lithium, tin and indium, as well as rare earth elements, tantalum, niobium, and zirconium. Avalon is currently focusing on developing its Separation Rapids Lithium Project, Kenora, ON and its East Kemptville Tin-Indium Project, Yarmouth, NS to production, while continuing to advance its Nechalacho Rare Earth Elements asset. Social responsibility and environmental stewardship are corporate cornerstones.