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.
The Separation Rapids lithium deposit
Petalite is the preferred lithium mineral feedstock for certain specialty glass-ceramic products for technical reasons, notably its consistently low impurity levels.
The petalite found at the Separation Rapids deposit also offers potential to provide a high purity lithium chemical product at a relatively low-cost to serve the needs of lithium ion re-chargeable battery manufacturers. A positive PEA was completed in September 2016, confirming a technically viable process and positive economics for the recovery of a battery-grade lithium hydroxide product from Separation Rapids' petalite.
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.
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. By-product recovery offers the possibility of significantly increased revenues and reduced amounts of waste material to dispose of.
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.
PRELIMINARY ECONOMIC ASSESSMENT (November 2017)
On September 27, 2016, Avalon announced the results of a positive Preliminary Economic Assessment on the Separation Rapids project. The PEA was conducted to investigate the potential for recovery of a lithium product suitable for the battery market from the resource. The results confirm a technically viable process and positive economics for the recovery of a battery-grade lithium hydroxide product. The full news release can be read here.
The 2016 PEA development concept envisioned an open pit mine, potentially transitioning to underground mining in later years; with milling onsite to produce a lithium mineral concentrate and by-product feldspar. The lithium mineral concentrate would then be processed in a hydrometallurgical plant (presently contemplated for Kenora) to produce lithium hydroxide for the battery industry or sold directly into the glass industry. The model assumed average annual production of 14,600 tonnes of lithium hydroxide for a minimum of 10 years and 100,000tpy of feldspar mineral concentrate.
Total CAPEX for this initial model was estimated at $514 million, inclusive of $86 million in contingencies and $7 million in sustaining capital. This includes the mine, concentrator and a hydromet plant assumed to be in Kenora. The hydromet plant accounts for approximately 50% of the total CAPEX estimate.
The average cost to produce lithium hydroxide was estimated at US$4900/tonne versus a price assumption of US$11,000/tonne. Pricing for lithium hydroxide has moved significantly higher over the last year and has recently been reported at US$18,000/tonne. An updated PEA financial model will be prepared once the current work program is completed.
Note the PEA is preliminary, includes inferred mineral resources considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment will be realized.
CURRENT ACTIVITIES AND FUTURE PLANS
In February 2017, Avalon announced that laboratory testwork on the lithium mica lepidolite (a second lithium mineral found at Separation Rapids) confirmed a 99.88% pure lithium carbonate product could be made from this material. Avalon and Lepidico Ltd. of Perth, Australia subsequently entered into a non-binding letter of intent under which it is contemplated that Avalon would sell a minimum of 15,000 tpa of lepidolite concentrate produced from its planned phase 1 demonstration plant to Lepidico for processing at Lepidico's planned production facility.
Avalon carried out additional drilling (April - May 2017, Jan-Feb 2018) with the objective of increasing the Separation Rapids resource. Early results from the first drilling program both expanded the lithium resource and provided better definition of the lithium mineralogical zoning in the total resource. Avalon is also continuing to optimize metallurgical processes to confirm design parameters and product properties.
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
Avalon is pursuing a staged development approach for the Separation Rapids project, involving initial construction of a demonstration scale process plant in the Kenora area. This approach will satisfy the need to produce large volume trial samples of the company’s various lithium products, demonstrate the efficiency of Avalon’s innovative processes and confirm the ability to scale up and expand this technology in an operational environment. Several models for this plant are under consideration, involving different rates and variations of the flowsheet depending on the product mix to be recovered. Avalon is in discussions with potential strategic partners interested in securing supplies of lithium; the plant’s final flowsheet will be determined collaboratively.
Following completion of the current testwork program, Avalon will be in a position to proceed with another bulk sample trial. When this work is completed, financing is secured and any necessary operating permits are in place, Avalon will be in a position to proceed with Phase 1 plant construction possibly as early as 2018.
Avalon also plans to proceed with an update of its 2016 PEA Technical Report to reflect the potential for both petalite and lepidolite lithium concentrate production, in addition to value-added lithium battery materials, using the staged development approach.
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.