A fresh look at Technology Metals opportunities at ... · This corporate presentation contains or...

CRITICAL MATERIALS FOR A SUSTAINABLE FUTURE

TSX: AVL

OTCQX: AVLNF

A fresh look at Technology Metals

opportunities at Nechalacho, NWT

May 2018 Donald S. Bubar

President & CEO


Forward looking information

This corporate presentation contains or incorporates by reference “forward looking statements” within the meaning of the United States Private Securities Litigation

Reform Act of 1995 and applicable Canadian securities legislation, which may not be based on historical fact. Readers can identify many of these statements by

looking for words such as “believe”, “expects”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words or the negative thereof.

Statements that are not based on historical fact contained in this presentation, including through documents incorporated by reference herein, are forward-looking

statements that involve risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected

in the forward-looking statements . Such forward-looking statements reflect the Company’s current views with respect to future events and include, among other

things, statements regarding targets, estimates and/or assumptions in respect of reserves and/or resources , and are based on estimates and/or assumptions

related to future economic, market and other conditions that, while considered reasonable by the Corporation, are inherently subject to risks and uncertainties,

including significant business, economic, competitive, political and social uncertainties and contingencies. These estimates and/or assumptions include, but are

not limited to: grade of ore; rare metal and by-product commodity prices; metallurgical recoveries; operating costs; achievement of current timetables for

development; strength of the global economy; availability of additional capital; and availability of supplies, equipment and labour. Factors that could cause the

Company’s actual results, performance, achievements, developments or events to differ materially from those expressed or implied by forward-looking statements

include, among others, but are not limited to, market conditions, the possibility of cost overruns or unanticipated costs and expenses, the impact of proposed

optimizations at the Company’s projects, actual results of exploration activities, mineral reserves and mineral resources and metallurgical recoveries,

discrepancies between actual and estimated production rate, mining operational and development risks and delays, regulatory restrictions (including

environmental), activities by governmental authorities, financing delays, joint venture or strategic alliances risks, or other risks in the mining industry, as well as

those risk factors discussed or referred to in the Company’s annual Management’s Discussion and Analysis and Annual Report filed with the securities regulatory

authorities in all provinces and territories of Canada, other than Québec, and available at www.sedar.com. Most of the foregoing factors are beyond Avalon’s

ability to control or predict. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially

from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or

intended. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. The forward-

looking statements contained herein are qualified in their entirety by this cautionary statement. Readers should not place undue reliance on the forward-looking

statements, which reflect management’s plans, estimates, projections and views only as of the date hereof. The forward looking statements contained herein is

presented for the purpose of assisting readers in understanding the Corporation’s expected financial and operating performance, and the Company’s plans and

objectives, and may not be appropriate for other purposes. Avalon does not undertake to update any forward-looking statements that are contained herein, except

in accordance with applicable securities law. The geological information contained in this presentation has been reviewed and approved by Don

Bubar P. Geo. (ONT) and President & CEO, Avalon Advanced Materials, qualified person for the purposes of National Instrument 43-101.

2

Safe Harbour Statement

http://www.sedar.com/






• Soaring demand for neodymium and praseodymium for use in high

strength magnets - now vital for electric motors used in electric

vehicles

• Rising prices of neodymium and praseodymium

• Presence of high grade, near surface Nd-Pr and Dy resources in

T-Zone and Lake Zone

• T-Zone also contains significant lithium resources as lepidolite /

polylithionite - which are in increasing demand to make lithium

battery materials

• Potential for near-term, small-scale development to produce Nd-Pr

rich concentrates for export

3

What has changed since 2013?


• Focus on materials that enable clean technology

• Design the operation to minimize environmental impacts and plan for

productive use of the land post closure

• Focus on process efficiency, minimizing waste and maximizing the

recoverable products from the ore

• Apply a staged development approach, starting at a modest scale, to

minimize project footprint and potential risks to environment, while

also reducing investment risk

• Engage early and often with local indigenous communities to create

awareness about risks and the opportunities for business

partnerships and job creation

4

Avalon’s Sustainable Development Strategy


Nechalacho Project History: Part 1

First U, then Nb-Ta, later Be create interest

1970-71: The first claims were staked in the area on a radiometric anomaly

and optioned to Giant Yellowknife Mines as a uranium prospect.

1976: Highwood Resources, while exploring for uranium, discovered that

the property was in fact host to niobium-tantalum and REE mineralization.

1980: Placer Dome, recognizing the size potential of the “Lake Zone,”

optioned the property and conducted geophysics, drilling and metallurgical

tests for Nb and Ta. PD dropped the option in 1982 because the Nb-Ta

mineralization was too fine-grained for liberation.

1983: Follow-up drilling by Highwood on Lake Zone and T-Zone

1983-85: Highwood discovered beryllium in the T-Zone and focused on

North T. A decline was driven into the North T-Zone and a bulk sample

extracted for metallurgical testing and market development.


Nechalacho Project History: Part 2

Be, then Y and HREE, now Nd-Pr, Dy & Li

1986-90: Highwood joint ventured the North T to Hecla and later Conwest

with further metallurgical testwork completed for beryllium and yttrium.

1999: Dynatec took control of Highwood and re-activated the project.

2001-02: Navigator optioned the property focused on tantalum, but

relinquished it when tantalum prices dropped.

2002-05: Highwood re-organized and spun out Thor Lake into a new

public company called Beta Minerals, but did no new work.

2005: Avalon acquired the property and began re-evaluating Lake Zone

REE potential as well as North T, leading to completion of 2007 Scoping

Study followed by initial drilling in 2006-07.

2008: Discovery of Basal Zone high grade HREE resource leads to major

work program culminating in full Feasibility Study in 2013.


7

Avalon Share Price vs.

REE Prices 2008-2013

Rare Earth Oxide Commodity Price Index (FOB $US/tonne) vs Share Price ($CAD)


What are Rare Earth Elements?

Light REE:

La = Lanthanum

Ce = Cerium

Pr = Praseodymium

Nd = Neodymium

Sm = Samarium

Heavy REE:

Eu = Europium

Gd = Gadolinium

Tb = Terbium

Dy = Dysprosium

Ho = Holmium

Er = Erbium

Tm = Thulium

Yb = Ytterbium

Lu = Lutetium

Y = Yttrium

Critical Magnet REE: Neodymium, Praseodymium and Dysprosium


• REE (NdFeB) or “Neo” Magnets reduce

electric motor/generator size and weight, and

reduce power consumption

• Major applications include:

• Electric Cars (5-10 kg)

• Hybrid-electric cars (1-3 kg)

• Wind turbines (0.6-1.0 tonne/MW)

• MRI machines (1-3 tonnes)

• Trend toward larger volume applications

• Approximately 30% of the magnet is neodymium-praseodymium metal

• HREE dysprosium and terbium additions are key to making “heat resistant” magnets

vital to automotive and other applications

• The world still largely relies on China for rare earth supply where it is still produced

unsustainably. New sustainable sources are needed.

Electric Motors for EVs rely on rare

earth magnets using Nd-Pr

100 Kw generator

with neo magnets

9


10

Report on Critical Materials for the EU All REE are seen as having supply risk

Report of the Ad hoc Working Group on defining critical raw materials May 2014


Neodymium Prices Steady increase from 2015 to 2018 predicted to continue

11

Price used in Avalon FS (2013) $76.78/kg

Price predicted for 2022 $123/kg


12

Rare Earth Elements Supply Chain

Requires significant capital investment

Mining Milling Hydro-

metallurgy

Refining Reduction Applications

From the

ground to

crushed

ore

Beneficiation &

concentration

of REE

minerals

Cracking & dissolving

the REE minerals to

produce a mixed REE

oxide precipitate

Separating and

purifying the

individual REE

oxides

To metals for

specific applications

such as magnet

alloys

Permanent magnets

for automotive and

consumer electronics

phosphors in lighting,

etc.

Avalon’s contribution to REE supply chain Value added


NORTHWEST TERRITORIES

Fort Smith

Fort Resolution Hay River/

K’atl’odeeche

Canadian National Railway

Yellowknife

Pine Point

Bluefish

Hydro Dam

Taltson

Hydro Dam

Great

Slave

Lake

Behchoko

13

Thor Lake Area and Regional

Infrastructure

]

] Snare

Hydro Dam

Lutsel K’e

Proposed

National Park

Thor Lake

(Nechalacho Mine and Concentrator)

ALBERTA

N

0 100 km

Whati

SASKATCHEWAN

Potential

Hydro Line

]


14

• A world-class technology

metals resource with

numerous zones enriched in

REE, lithium, beryllium,

niobium, tantalum, gallium and

zirconium

• Several near surface zones

highly enriched in Nd-Pr: T-

Zone and Tardiff Lake Zones

Nechalacho

North Tardiff Zone

South Tardiff Zone

Lake Zone

Line of Cross Section


Nechalacho Lake Zone General

Geology (Vertical Cross Section Looking West)

15

Looking west at 416200E

High Grade “Basin”

S N

1600 metres

Upper Zone

Basal Zone High Grade HREE “Basin”

T-Zone deposits are satellite pegmatites

to the north also rich in Nd-Pr, as well as

lithium and beryllium

N S

North & South Tardiff

Rich in Nd-Pr grading up to

8%TREO and 2% Nd+Pr

North and South Tardiff Lakes


Nechalacho 2013 Feasibility Study

Basal Zone Development Concept

• Mining underground drift and

fill/long-hole stoping at 2,000 tpd, or

730,000 tonnes per year (tpy)

• Flotation process to produce

130,000 tpy of mineral concentrate

• Hydrometallurgical treatment of

mineral conc by sulphuric acid bake

at Pine Point to yield 55,000 tpy of

REE conc and 112,000 tpy of

Enriched Zirconium Conc (EZC)

• Rail shipment of REE Conc to

Refinery in southern U.S. (Geismar,

Louisiana)

• Planned initial production of 7,000 tpy

separated REE oxides plus EZC (with

Nb, Ta, HREE)

• CAPEX:

CAD$1.575 billion (incl. refinery and

sustaining capital)

• Operating Costs:

CAD$265 million/ year or $362/mined

tonne of ore (all inclusive)

• Revenues: CAD$646 million /year or

$885/ mined tonne of ore

• Pre-tax IRR: 22.5%

• NPV @ 10%: $1.35 billion

17


18

Measured and Indicated Resources in the Basal Zone at

Various NMR Cut-offs (August 2013)

Basal Zone Tonnes

(millions)

%

TREO

%

HREO

% HREO/

TREO

%

ZrO2

%

Nb₂O₅ %

Ta₂O₅

US$345 NMR Cut-Off (Reflects entire Basal Zone)

Measured 12.56 1.71 0.38 22.50 3.20 0.405 0.0404

Indicated 49.33 1.62 0.35 21.27 3.07 0.405 0.0398

US$800 NMR Cut-Off (Approximately Reflects High Grade “Basin”)

Measured 5.11 2.20 0.58 26.17 4.23 0.52 0.0544

Indicated 16.15 2.20 0.55 24.87 4.13 0.52 0.0542

US$1,000 NMR Cut-Off (Selected parts of High Grade “Basin”)

Measured 2.49 2.49 0.68 27.38 4.77 0.59 0.0620

Indicated 6.99 2.52 0.66 26.03 4.66 0.58 0.0614


Near-surface Rich Nd-Pr Mineralization –

North and South Tardiff Zones

Thor Lake

Long Lake

S Tardiff

N Tardiff

N Tardiff surface

mineralization

S Tardiff surface

mineralization

Trench B (Bastnaesite): 7-8% TREO (2.0% Nd+Pr)

Trench Zr (Zircon): 3.8-5% TREO (0.7% Nd+Pr)

DH 519 3.5% TREO/9.8m with 8.6kg/t Nd+Pr

19

Target Potential for >1 million tonnes at 2.5 – 3.5%

TREO

At surface so small open pit

~8 kg/tonne Nd2O3+Pr2O3


Nechalacho: Known Mineralized Zones

20

North Tardiff Zone

North Tardiff

Zone

North T Deposit

South T Deposit

Lake Zone


• A decline was driven into

the North T Deposit in 1983-

85 to conduct underground

exploration and recover a

bulk sample of the high-

grade beryllium ore

• Decline also intersected the

F-Zone Nd-Pr and Y-Zone

lithium resources near-

surface

21

North T Deposit

3-D Model


22

Mineralized Zones - North T Deposit

Y-Zone is also a rich lithium resource!

F Zone: 43,877 tonnes at 6.50% TREO including 1.55% Nd oxides

Y Zone is enriched in lithium mica (lepidolite) but never assayed systematically

and also contains xenotime which is rich in HREO including dysprosium


• The adit into the North T encounters the first mineralization in the F

Zone (subzone of North T Deposit)

• The F Zone has 43,877 tonnes at estimated 6.5% TREO with

estimated 1.5% Nd2O3 (15 kgs/t) plus 0.2% Pr2O3 (2 kgs/t)

(Bastnaesite-Quartz mineralization)

• Small tonnage but very high grade REE and bastnaesite readily

recoverable using low-cost optical sorting or DMS technology

• Nd2O3 and Pr2O3 projected value 2020 is >$100/kg so this is

US$1000+ rock gross value

• Mining out the F Zone would open further access to the deeper lithium,

beryllium and xenotime (Dysprosium) rich portions of the North T

deposit

23

The S, R and T Zones also rich in REE

F Zone – Particularly high grade REE

Note: Resource estimate from Avalon Preliminary Economic Assessment (2007) NI 43-101 report available on SEDAR


North T Deposit F-Zone Bastnaesite:

Highly Enriched in Nd-Pr

24

Bastnaesite amenable to recovery using low cost DMS techniques

Cut-offCutting

Element

Sub-

ZoneTonnes Density

TREO +

Y2O3 %%Ce2O3 %Nd2O3 %Y2O3

0.1 %Ce2O3 F 43,877 2.68 6.50 3.14 1.55 0.06

Note: Resource estimate from Avalon Preliminary Economic Assessment (2007) NI 43-101 report available on SEDAR


• The S, North T and South T Zones at Thor Lake are all polylithionite (“lepidolite”) bearing

• The North T has polylithionite, with 6.97% Li2O predominantly in the Upper Intermediate Zone. Lithium resources not yet defined because there was no systematic assaying for lithium.

• The South T has reported 2.39Mt of low grade Be mineralization with no analyses for lithium but abundant polylithionite reported (it is a high Be-Nb deposit as well)

• R and S Zones have polylithionite (6.6% Li2O in mineral) on surface but not drilled. S Zone trench samples ave. 1.0% Li2O.

• Potential for lepidolite tonnage equal to or greater than the present Separation Rapids lepidolite resource (1.85Mt at 1.38% Li2O)

Polylithionite / lepidolite (lithium)

mineralization at Nechalacho

(Note polylithionite is a type of lepidolite)

25


F-Zone Li-Mica (grey

mineral) zone in walls

of decline underground

in the North T Deposit

26

Resources delineated in the

T Zone Deposits but not

analyzed for lithium:

North T (460,000 t)

South T (2,390,000 t)


• Leaders in Aboriginal Community Outreach

• The name Nechalacho was formally conveyed by

the YKDFN in a ceremony held at site in 2009 in

respect of the First Nations’ traditional land use

• Accommodation Agreements

• Signed with Deninu K’ue First Nation and

NWT Métis Nation (Participation Agreement)

• Negotiations completed with Lutsel K’e Dene

• Continuing engagement with NSMA,

Yellowknives Dene, Tli Cho, KFN

• Completed and approved Report of Environmental Assessment

• Received preliminary construction Class A Land Use Permit (April 2014) and Class B

Water License (May 2014) and site preparation initiated.

• Final permitting process can be completed when work at the site resumes

27

Environmental and Social

Responsibility at Nechalacho

Naming ceremony attended by YKDFN Chiefs

Edward Sangris and Ted Tsetta


Nechalacho: Plans for 2018

• Complete scoping study on East Arm-YK Road / Hydro infrastructure

corridor (in progress)

• Prepare scoping study on small scale development model for F-

Zone and Tardiff Zones Nd-Pr resources

• Re-sample old drill cores to analyze for lithium and establish initial T-

Zone lithium resource estimate

• Look at Dysprosium potential deeper in North T

• Resume permitting process and community engagement toward

identifying local indigenous business partners


Contact us: 1901-130 Adelaide St. W.

Toronto, Ontario, Canada

M5H 3P5

+1 (416) 364-4938

[email protected]

Thor Lake, NWT

www.AvalonAdvancedMaterials.com

TSX: AVL

OTCQX: AVLNF

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