Preliminary Economic Assessment
Lithium Chemicals, Feldspars, High Purity Silica
LITHIUM & OTHER ADVANCED MATERIAL POTENTIAL
Avalon’s Separation Rapids Lithium Project has the potential to produce high purity lithium compounds for two distinct markets: an industrial mineral product for glass-ceramics and lithium chemicals for energy storage. It also has potential for several by-products including feldspars, silica, rubidium, cesium and tantalum.
The Separation Rapids deposit is one of the largest “complex-type” lithium-cesium-tantalum pegmatite deposits in the world, unusual in its enrichment in the rare, high purity lithium mineral petalite. Petalite is the preferred lithium mineral feedstock for certain specialty glass-ceramic products for technical reasons, notably its consistently low impurity levels.
Petalite also offers potential to produce a high purity lithium chemical product at a relatively low-cost to serve the needs of lithium ion re-chargeable battery manufacturers. Growing demand for rechargeable batteries in electric vehicles and home energy storage is expected to result in continued rapid growth in global consumption of lithium. Many industry analysts are predicting that the demand for lithium will double over the next 5-10 years, creating a supply deficit, as existing producers struggle to meet the new demand.
In August 2018, Avalon completed an updated Preliminary Economic Assessment, reflecting a simplified business model that focuses on initial production of lithium mineral concentrates, with potential for future expansion into production of the battery materials lithium carbonate and lithium hydroxide.
Lithium is not the only mineral of interest at the Separation Rapids project. Highly fractionated pegmatites, like the Separation Rapids deposit, contain many minerals of economic importance. The deposit has the potential for recovery of several valuable by-products including high purity silica, feldspar, rubidium, cesium and tantalum.
The Separation Rapids lithium deposit
LOCATION, ACCESS, OWNERSHIP AND TOPOGRAPHY
The 100% owned Separation Rapids property is situated approximately 70 km by road north of Kenora, Ontario. The property consists of 15 Mineral Claims and one Mining Lease covering approximately 5,982 acres (2,421 hectares). Tenure for the mineral resource is held under a 421 hectare, 21 year Mining Lease (Ontario CLM469). Avalon also added three claims to the property covering 28 units (448 hectares), covering a corridor over the property access road.
LOCATION AND INFRASTRUCTURE MAP
The Separation Rapids property is directly accessible by a private road. The main line of the Canadian National Railway passes by 50 km south of the Separation Rapids property while the main line of the Canadian Pacific railway passes by 27 km further south.
Since acquiring the property in 1996, Avalon has expended approximately $10 million on exploration and development work, primarily focused on the deposit’s lithium potential. Initial exploration work conducted in 1997-2001 included geological mapping, trenching, ground magnetic surveys, mineralogical studies and diamond drilling totalling 10,152 m in 69 holes. Subsequent work focused on tantalum potential and other potential industrial mineral products.
Early exploration work culminated in 1999 with the completion of a comprehensive Pre-Feasibility Study on the viability of producing petalite with by-product feldspars, by independent consultant Micon International Inc. The business model at the time involved production of high purity concentrates of petalite for sale to glass-ceramics manufacturers. While the study produced a positive result, Avalon was unable to secure the necessary commitments on off-take from consumers to justify further investment at that time and the project was put on hold.
Over the next decade, Avalon continued to study alternative lithium product ideas for markets in glass, ceramics and specialty composite materials.
In 2014, Avalon re-activated the Separation Rapids project after receiving expressions of interest in its petalite from several international glass manufacturers. The process flowsheet was greatly simplified and in 2015 new petalite samples were produced for analysis by these customers - all of whom confirmed they met the desired specifications in terms of lithium grade and impurity levels. Avalon then conducted a pilot plant trial to successfully produce one tonne of concentrate for further evaluation by the customers in glass-ceramics applications.
Avalon concurrently began investigating how its petalite could be used to produce high purity lithium chemicals for the battery industry relatively inexpensively compared to other existing alternative lithium source materials. Market studies suggest that lithium hydroxide will be in increasing demand as a feedstock for lithium ion battery cathode chemistries. Consequently, Avalon developed a process flowsheet to make lithium hydroxide from its petalite. The potential for production of high grade lithium hydroxide (99.9%) was demonstrated through laboratory test work performed in 2015.
Avalon carried out additional drilling (April - May 2017, Jan-Feb 2018) to expand the lithium resource and provide better definition of the lithium mineralogical zoning in the total resource.
Resource Estimate at 0.6% Li2O Cut-off Grade (As at November 15, 2017)
|Petalite Zone||Lepidolite-Petalite Zone||Total Tonnes (Mt)||Li2O (%)||Rb2O (%)|
|Tonnes (Mt)||Li2O (%)||Rb2O (%)||Tonnes (Mt)||Li2O (%)||Rb2O (%)|
|Measured + Indicated||6.28||1.37||0.327||1.85||1.38||0.473||8.12||1.37||0.360|
CIM definitions were followed for Mineral Resources.Footnotes:
- The Qualified Person for this Mineral Resource estimate is William Mercer, PhD, P.Geo. (ON)
- The resource estimate is based on 74 drill holes totalling 11,644 metres drilled between 1997 and 2017 by Avalon.
- Drill data was organised in Maxwell DataShed and for estimation purposes was transferred to the Geovia GEMS 6.8 software, wherein the block model was developed.
- The geological units were modeled as outlined by drill core logs.
- Resources were estimated by interpolating composites within a block model of 10 x 10 x 3 metre blocks.
- Grade interpolation used the Ordinary Kriging method combined with variograms and search ellipses modeled for each rock unit.
- Measured material was defined as blocks using composites from ≥ 4 drill holes and a distance ≤ 25 m to the nearest composite and additional blocks with excellent geological and grade continuity, while indicated material includes blocks using ≥ 3 drill holes and a distance ≤ 35 m to the nearest composite and blocks with geological and grade continuity, and inferred material was defined as blocks with composites from ≥ 2 drill holes and interpolated geological continuity up to 40 m below diamond drill holes.
- Two metre composites were used and no capping was necessary.
- The mean density of 2.65 t/m3 was used for unit 6ABC and 2.62 t/m3 for unit 6D.
- The cut-off grade reported in this resource estimate, 0.6% Li2O, is consistent with the previously published resource estimate by Avalon (Preliminary Economic Assessment, 2016).
- Mineral resources do not have demonstrated economic viability and their value may be materially affected by environmental, permitting, legal, title, socio-political, marketing, or other issues
Updated Preliminary Economic Assessment (August 2018)
The updated PEA utilizes a plant throughput rate of 475,000 tonnes per annum compared to the 950,000 tpa rate used in the 2016 PEA. This will result in a 20 year operating life, based on the present known mineral resources, with annual production of 71,500 tonnes of petalite concentrate; 11,800 tonnes of lepidolite concentrate (both for 18.5 years); and, commencing in Year 6, 100,000 tonnes of feldspar (through to Year 20). The upfront capital expenditure requirement is C$77.7 million with a further C$13.7 million planned for the feldspar circuit in Years 5/6 (or once payback of the initial capital is complete). Average annual revenue is estimated at C$90 million versus average annual costs of C$60 million, resulting in a pre-tax Net Present Value (at 8% discount rate) of C$156 million and a pre-tax Internal Rate of Return of 27.1%. The post-tax NPV is calculated at C$102 million and the IRR at 22.7%.
Petalite production will be supplemented with the production of a second lithium mineral concentrate: lepidolite. Lepidolite is a lithium mineral which is in growing demand for conversion to lithium carbonate. Avalon already has a preliminary off-take agreement in place with Lepidico Ltd., of Perth, Australia. Lepidico is currently planning to develop a lithium carbonate demonstration production facility in Sudbury, Ontario.
Avalon's 2016 PEA presented a model focused on the conversion of petalite concentrate into lithium hydroxide for the battery and energy storage industries. This remains an opportunity for a future expansion of the operation as additional mineral resources are delineated. Development into these markets would start with the addition of a pilot scale lithium hydroxide production circuit at the mine site to produce trial quantities of the battery material product and prove the innovative, new process flowsheet developed by Avalon in 2016. This process offers a number of advantages over the traditional flowsheet, mainly through lower chemical consumption and less waste products for disposal.
The current development model results in a small environmental footprint, including low GHG emissions and almost non-existent air emissions. There are no anticipated environmental impacts of concern, with the mineral deposit and waste rock being non-toxic and non-acid generating and minimal water discharge being anticipated.
Note: the PEA 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 PEA will be realized.
CURRENT ACTIVITIES AND FUTURE PLANS
The next step in the project's development is to proceed with a short pilot program to finalize reagent recycling and water treatment processes, after which a comprehensive Feasibility Study will be completed. This work is expected to proceed in 2018/2019 once off-take agreements are concluded and additional financing is in place. Some additional drilling will be undertaken to bring more of the Inferred resources into the Measured and Indicated categories.
Avalon continues to explore for new lithium pegmatites, particularly on the western extension of the property, where a number of new petalite occurrences have been identified, but never previously drilled, including the Glitter pegmatite. A detailed mapping and sampling program on the western extension area is currently in progress.
Please note that the projected timeline is reliant on a positive Feasibility Study as well as offtake commitments, project financing, and timely receipt of all permits and environmental approvals.
ENVIRONMENT, PERMITTING and COMMUNITY
Avalon completed environmental baseline studies in the project area in 1999, ensuring that local environmental sensitivities were identified at an early stage. This study was updated in 2007 and was further updated in 2013 to completion of a Species at Risk Act study. Avalon completed additional waste rock and tailing assessments and work is planned to further assess tailings from the new process to update the tailing management facility and water treatment plant design if necessary. In addition to these assessments, a draft site layout and water management plan has been completed for discussion with all communities of interest prior to finalizing the Project Description which, when submitted, formally starts the permitting process.
The property lies within the traditional land use area of the Wabaseemoong Independent Nations (“WIN”) of Whitedog, Ontario: an Aboriginal community located approximately 35 km southwest of the property. In August 1999, Avalon signed a Memorandum of Understanding with WIN which was renewed in May, 2013. Avalon is committed to developing the project in co-operation with WIN. In addition, Avalon has initiated discussions with the Métis Nation of Ontario.
LAND USE INSPECTION REPORTS
Avalon Inspection Report – August 10, 2017
*These programs are being conducted under the direction of David Marsh, Senior Vice-President, Metallurgy and Technology Development and the Qualified Person for the technical and scientific information.