Avalon Advanced Materials President & CEO Don Bubar shares the importance of sustainability reporting for junior mining companies, how metallurgical efficiencies can help reduce environmental footprints and his company’s goals for 2017.
Avalon Advanced Materials (TSX:AVL) is a Canadian mineral development company primarily focused on rare metals and minerals for niche markets with growing demand from new technology. The company holds 100-percent interest in three advanced stage projects representing a diverse portfolio of commodities including lithium, tin, indium, rare earth elements, tantalum, niobium and zirconium. Avalon’s current focus is on its Separation Rapids lithium project near Kenora, Ontario and its East Kemptville tin-indium project in Yarmouth, Nova Scotia.
Avalon released results of its positive Preliminary Economic Assessment for Separation Rapids in September 2016, showing a pre-tax internal rate of return of 19 percent, an after-tax internal rate of return of 16 percent and a net present value at an eight-percent discount rate of $343 million pre-tax and $228 million after-tax.
The company recently announced the completion of a private placement financing for gross proceeds of $1 million, which will primarily be used to advance exploration work at Separation Rapids.
Avalon is recognized as a leader in corporate social responsibility and environmental stewardship in the junior mining space. In November 2016, Avalon published its fifth annual sustainability report in accordance to Global Reporting Initiative guidelines. For two consecutive years (2015, 2016) Avalon has placed among Corporate Knights’ Future 40 Responsible Corporate Leaders in Canada.
Investing News Network: You’ve just released Avalon’s fifth sustainability report in accordance with the Global Reporting Initiative guidelines, why should mining companies complete sustainability reports and what is the value for shareholders?
Don Bubar: Sustainability reports are all about creating transparency about your activities within the communities in which you operate. Most major companies in the mining business now produce comprehensive sustainability reports and are increasingly putting more information about their environmental work online to make it accessible to the general public and create that transparency. The value to the shareholders is really around reducing social license risk. For junior companies, this is also very important. I think social license risk is the biggest risk that development stage companies face in terms of obtaining the approvals necessary to move their projects through development and into production. Anything a company can do to reduce this risk is advantageous for shareholders and will create value in the long term. I think it’s something that many junior companies are still not paying close enough attention to.
In Avalon’s case, we were motivated to start reporting on sustainability and our performance on social and environmental responsibility back in 2010, when we realized that if you want to be in the business of producing materials for clean technology, it must be done in a sustainable way. That’s because cleantech companies audit their supply chains back to the sources of the raw materials to ensure that they are produced sustainably. By demonstrating our commitment to high environmental and social performance early on, we will have better access to markets for our products in the clean tech sector, creating an advantage for us in the marketplace.
INN: How do you feel Avalon compares with its junior mining peers in terms of sustainability?
DB: Avalon is the leader, at least among Canadian junior resource companies. I don’t know of another Canadian listed junior company of our size that has been consistently producing a GRI compliant sustainability report for the last five years.
INN: The theme of your 2016 report is ‘Minerals for Transitioning Economies.’ Please give our audience some more insight into the messaging behind this theme and how it relates to sustainability in general, and more specifically to Avalon’s projects.
DB: Avalon’s focus is on critical materials for clean technology and the demand for these niche market commodities, such as lithium and rare earths, is being created by the technology revolution around energy storage, communications, renewable energy and electric vehicles. These technologies are leading to a major transition in global economies particularly around energy efficiency, which is major theme of sustainability generally. This is creating a huge opportunity to embrace a whole new way of doing business in the resource sector that builds high performance on social environmental responsibility into the business plan and to further enhance shareholder value.
We want to produce critical materials in a sustainable way and Avalon has been committed to this for over five years, yet I often get asked, “why do we bother doing it?” and “isn’t it a waste of money?” Honestly, we think that once you build sustainability into the culture of the company, as we have, it is really not a significant additional cost burden. And it will ultimately create value and reduce business risk for our shareholders in the long term.
INN: Could you please share some of your successes for 2016 in terms of meeting your goals for the year with all of your various outreach initiatives?
DB: Avalon has been in a transition year in terms of the focus of the company, shifting from our Nechalacho rare earths project in the Northwest Territories to our Separation Rapids lithium project in northwestern Ontario. We have had to re-establish our relationships in the local community in Ontario particularly with First Nations. It’s been a very gratifying experience so far, as everybody understands that lithium will be increasingly important in this new economy centered on the revolution in energy storage technology and that this will create a new economic development opportunity for that part of the province.
Avalon has been communicating its message to the community on how we plan to operate in a sustainable way. This includes taking advantage of existing local clean power generation opportunities such as hydro power and developing the project in a way that minimizes the risk to the environment and the amount of waste material that’s generated, although there are no toxic materials in the ore to create a concern.
INN: Can you please tell us more about how improving metallurgy can reduce an operation’s environmental footprint?
DB: There are many ways that metallurgy can help reduce the environmental footprint of an operation on both greenfields and brownfields projects. Innovations in processing and extraction technology are improving efficiency and recoveries by reducing the amount of waste material and by recycling of the reagents are used in the process flow sheet. These innovations in the metallurgical process have opened up new opportunities, including the ability to create additional value from waste material at closed mine sites.
Avalon is now trying to take advantage of that with our East Kemptville tin-indium project in Nova Scotia. The goal is to recover valuable metals in material left behind as waste due to inefficient recovery methods, when the site was an operating mine in the 1980s. Avalon plans to build a small processing plant to treat the waste materials and recover tin (and potentially other contained metals) that creates a sustainable environmental remediation solution by generating revenue while properly disposing of the waste.
INN: Interesting. Heading into the New Year, what are some of your goals for 2017 and how do you plan to meet them?
DB: We want to move our Separation Rapids lithium project into the next phase of development, which involves scaling up our process flowsheet through pilot plant work and initiating trial production of our lithium products for the lithium-ion battery sector and other markets. We’re still looking at the markets in industrial minerals and glass ceramics as well.
At the same time, we continue to develop our relationships in the local community and try to find ways to maximize the opportunity for Avalon’s First Nation partner, the Wabaseemoong Independent Nations of Whitedog. Avalon has a memorandum of understanding with WIN that we first entered into in 1999. We remain fully committed to maximizing the economic development opportunities in the community to help empower them to create new business opportunities for the long term.
At East Kemptville, we want to finalize our business plan for the small scale re-development model, secure full tenure to the site, obtain all necessary permitting approvals and project financing needed to get operations started in 2018.
INN: Sounds like 2017 is going to be a busy year for you and Avalon. Thank you for taking the time to educate our investors.
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