Avalon Announces Results of Positive Preliminary Economic Assessment for its Separation Rapids Lithium Project

- September 27th, 2016

Toronto, ON – Avalon Advanced Materials Inc. (TSX:AVL,OTCQX:AVLNF) is pleased to announce the completion of a positive Preliminary Economic Assessment (“PEA”) for its 100% owned Separation Rapids Lithium Project (the “Project”), Kenora, Ontario. The PEA was prepared under the oversight of Micon International Limited (“Micon”).

Toronto, ON – Avalon Advanced Materials Inc. (TSX:AVL,OTCQX:AVLNF) is pleased to announce the completion of a positive Preliminary Economic Assessment (“PEA”) for its 100% owned Separation Rapids Lithium Project (the “Project”), Kenora, Ontario. The PEA was prepared under the oversight of Micon International Limited (“Micon”).
The Separation Rapids Lithium Deposit (the “Deposit”) was originally evaluated by Avalon in 1997-2000 as a potential producer of lithium minerals for glass-ceramics under a pre-feasibility study (which was also prepared by Micon). The purpose of this 2016 PEA was to investigate the potential for recovery of a lithium product suitable for the battery market from the same lithium resource, and the results confirm a technically viable process and positive economics for the recovery of a battery-grade lithium hydroxide product.

  • An average mining rate (open pit) of 950,000 tonnes per year would yield an average annual production of 14,600 tonnes of lithium hydroxide for 10 years and 100,000 tonnes per year of feldspar mineral concentrate for 20 years, as it would continue to be recovered from previously processed material for an additional 10 years after the initial 10 year mine life.
  • The discounted cash flow (“DCF”) analysis yields a 19% internal rate of return (“IRR”) on a pre-tax basis and a 16% IRR on an after-tax basis, assuming 100% equity financing. The Project’s net present value (“NPV”) at an 8% discount rate is CAD$343 million pre-tax and CAD$228 million after-tax.
  • Total Project construction capital costs are estimated at $514 million, which is inclusive of $86 million in contingencies and $7 million in sustaining capital.
  • The average lithium hydroxide price assumption used for this PEA was US$11,000/tonne and the CAD:USD exchange rate assumption was US$1.00 = CDN$1.30.
  • Measured and Indicated Mineral Resources, as currently delineated, total 8.0 million tonnes averaging 1.29% lithium oxide and 38% feldspar. Inferred Mineral Resources contribute an additional 1.63 million tonnes at 1.42% lithium oxide to a maximum vertical depth of 260 metres. The deposit is open to depth and along strike.

At the production rate modelled for this PEA, the currently delineated lithium resource would support lithium production for at least 10 years. There is sufficient high quality feldspar (an industrial mineral) in the resource to support production for at least 20 years. If additional drilling on untested extensions of the Deposit were to increase the resource and extend the initial 10 year lithium production period, each additional year of additional lithium production could add $200 million in revenues per year and significantly increase the NPV of the Project.
Don Bubar, President and CEO, stated “I am delighted with the results of this PEA indicating that production of a high purity lithium battery chemical from Separation Rapids is indeed economically viable in this model. Extraction of lithium chemicals such as lithium hydroxide from lithium pegmatites like Separation Rapids is an emerging business requiring innovative new process technology. Under the leadership of SVP Metallurgy and Technology Development, Dave Marsh, over the past 12 months we have successfully developed a new process flowsheet to extract a lithium hydroxide product from the rare high purity lithium mineral petalite, something that had not been done before. We look forward to working with our partners in government, the battery materials sector and the local community to advance this Project to the demonstration plant stage.”
The PEA development model covers all aspects of project development, including mining, mineral concentration, and hydrometallurgical processing as well as all related infrastructure. Micon developed its capital and operating cost estimates from first principle capital quotations, estimates from suppliers, manufacturers, contractors and experience based on comparable operations in Canada and abroad. The capital and operating cost estimates were completed to a level consistent with an AACEI Class 4 estimate, with an intended level of accuracy of ±30%, based on Q3 2016 prices, excluding escalation. Currency is Canadian dollars unless otherwise stated.
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