Separation rapids project

Lithium/Tantalum

The 240-hectare Separation Rapids Specialty Minerals Project is located 58 km north of Kenora, Ontario in the highly prospective English River greenstone belt, which hosts lithium, tantalum and cesium mineralization. The Property is situated immediately adjacent to the east of Avalon Advanced Materials Inc.’s Big Whopper property, one of the largest rare metal pegmatite deposits in the world.

During July 2009, the Company undertook a field program at the property that included prospecting, line cutting, local geological mapping of newly-found outcrops, and the collection of 173 soil samples, 28 grab samples and 10 channel samples. The program identified a 50m to 100m wide zone with multiple, east-west trending, sub-parallel pegmatite sill-like bodies that range in width from a few centimetres to more than 5 metres.

The soil sampling program utilized Soil Gas Hydrocarbon (SGH) Geochemistry that was analyzed by Activation Laboratories (Actlabs) of Ancaster, Ontario. SGH is a deep penetrating geochemistry that allows for analysis from various types of media. Actlabs’ SGH analysis identified a strong Level 5 lithium anomaly below a peat bog approximately 100m east of, and along strike of, the most eastern exposures of the zone of pegmatites.

The demand for lithium is growing strongly due to the use of lithium carbonate in battery-powered vehicles and other electrical storage devices.

On September 27, 2016 and October 25, 2016, Avalon announced the results of a NI 43-101 Preliminary Economic Study (PEA) prepared under the oversight of Micon International Limited. The PEA investigated the potential for recovery of a lithium product suitable for the lithium battery market and the results confirm a technically viable process and positive economics for the recovery of a battery-grade lithium hydroxide product.

The PEA proposes a mine life of 10 years at a rate of 950,000 tonnes per annum. This would yield an average annual production of 14,500 tonnes of lithium hydroxide for 10 years and 100,000 tonnes per year of feldspar mineral concentrate for 20 years. The PEA noted further optimization potential for the project. The PEA utilized an existing Measured and Indicated Mineral Resource estimate of 8 million tonnes averaging 1.29% lithium oxide and 39% feldspar. The PEA estimated total project capex at $514 million and the base case provided a pre-tax IRR of 19% and 16% after tax. The average lithium hydroxide price assumption used in the PEA was US $11,000 per tonne with a US$/CDN$ exchange rate of $1.30. The PEA is filed on SEDAR and should be referred to for details.

Historically, the highest and best currently known use for material from the Separation Rapids Property was likely as an input to the glass industry. However Avalon has made considerable progress in approaching a higher and better use in the lithium battery market and other more valuable by-products. No fieldwork is currently being planned at the Property while we wait to assess the economic viability of various aspects of Avalon’s test work.