Avalon Rare Metals: Emerging as a Go-To Source for Heavy Rare Earths

By Robert Sullivan – Exclusive to Rare Earth Investing News

Speaking at an industry event at the Canadian Chamber of Commerce in Hong Kong on November 11, Avalon Rare Metals Inc. (TSX:AVL) President and CEO Don Bubar expressed confidence that his company could capture market share in the rare earths sector outside of China with their potentially world class Thor Lake project.

Though Avalon’s Nechalacho Rare Earth Element Project at Thor Lake in the Northwest Territories is still at the feasibility stage, Bubar commented that the company would be pushing to be “first to market” with an eye on “challenging ourselves to establish [Avalon] as the go-to source for heavy rare earth elements (HREE),”outside of China in the coming years.

Bubar highlighted that Avalon’s prefeasibility studies has indicated that the Thor Lake deposit had some of the highest concentrations of heavy rare earth oxides (HREO) in the world at 26.1 percent of their 4.298 million tonnes of total rare earth oxides (TREO).

This potential has drawn an interest from at least four companies, who according to Bubar have all signed Memorandums of Understanding (MOU) that include off-take agreements. Bubar didn’t reveal who in particular had signed the MOUs with Avalon, but indicated that he was optimistic the arrangements would be finalized in 2012.

Bubar noted that both further feasibility studies and development of the project would proceed as anticipated over the short-term, as Avalon was able to raise over $65 million through equity markets over the summer before the financial climate changed substantially at the beginning of August.

“We took one of the big risks out of our situation by raising that capital over the summer, so we know we can get our bankable feasibility study done without any risk of running out of money,” Bubar said.

Long-term plans for a separation facility

Avalon’s financial security could also prove to be important given the company’s plans for a separation facility.

“There is no separation capacity outside of China right now for heavy rare earths, so that’s a business opportunity open to a player that can bring a plant like that into production,”commented Bubar.

The Avalon CEO expects the proposed plant will add at least $100 million dollars to an estimated project cost at Thor Lake of $901 million.

Bubar did say, however, that Avalon would be open to a joint facility which could take concentrate from other projects and companies.

Bubar also revealed that it was highly unlikely that a separation facility would be built on-site, or even in Canada for that matter. Instead, the proposed facility would likely end up being located in the Southern United States, with concentrate brought down by rail from a hydromet plant near Hay River.

Thor Lake Update

Avalon’s Nechalacho project at Thor Lake is currently at the bankable feasibility stage, which is slated to wrap up in late 2012.

Should this prove to be successful, the company is aiming to progress to construction between 2013-2015, with first production possibly coming in late 2015 or early 2016. Avalon anticipates production of 2,000 tonnes of ore per day after the first year in operation, which translates to approximately 10,000 tonnes of TREO per year.

Avalon’s latest prefeasibility study, meanwhile, forecast the average “basket” price for Nechalacho REO in 2015 to be over $46 per kilogram.

Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.