Avalon Advanced Materials hits lithium market with market ready resource
Avalon Advanced Materials Inc. (TSX: AVL | OTCQX: AVLNF) first worked on the Separation Rapids lithium deposit in the 1990s when the market for the light metal showed strong growth for glass and lubricant applications. That was before the advent of the electronic battery, and top producer SQM all but made the project unviable with a massive increase in new supply from Chile.
Fast forward 20 years, and the supply and demand dynamics of the lithium market are looking very different. Lithium demand is set to more than double every five years because of electric vehicle battery demand, SQM said. Even though new mines are expected to open in Australia and Zimbabwe, the market needs several new sources of supply.
“I think there’s room for anyone right now,” Avalon CEO Don Bubar said. “The interest is certainly there, and the challenges for us are in identifying what the ideal development model is.”
Separation Rapids mostly contains petalite lithium, a type of pegmatite ore that is suitable to make lithium hydroxide, for electronic and electric vehicle batteries, and high-grade glass applications. About 20% of the resource is lepidolite lithium ore, which offer higher concentrations of pure lithium and can be turned into lithium carbonate. The company has kept a low profile during the recent lithium craze because it has focused on sampling ore at Separation Rapids, as opposed to carrying out a major drilling program to attract investment.
“We think that’s the smart way to do business,” Bubar said. “It’s a mistake that companies are making that come from a traditional mining background and using a traditional mining approach.”
Avalon in March announced a CAD$500,000, 1,500-meter diamond drill program at Separation Rapids to further delineate the resource set over 6,000 acres 70 kilometers north of Kenora, Ontario. Total exploration program since the 1990s tops CAD$10 million, and a preliminary economic assessment on the petalite ore confirmed its suitability for lithium hydroxide.
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Avalon and Don Bubar have a track record of developing niche mineral resources. The company also holds a rare earths project on its asset portfolio in the form of the Nechalacho project in the Northwest Territories, and a tin-indium project in East Kemptville, Nova Scotia. The company’s current main focus is lithium at Separation Rapids however.
The company’s main petalite resource plays into a growing market for glass applications, not just in traditional uses but also in new high-strength applications like the glass used in mobile phone screens, Bubar said. Glass manufacturers prefer petalite because of its low iron content that simplifies the purification process, he said. Buyers in the glass industry are also concerned that car manufacturers will also guzzle up all existing lithium supplies, Bubar said.
“The battery industry has soaked up all the lithium they can find and the glass industry is worried,” Bubar said. “While the battery market is growing, the glass industry is also growing.”
Testing is key for Avalon and Prospect Resources, a Western Australia-based exploration company that is developing Africa’s largest lithium project, also a petalite resource, on the outskirts of Zimbabwe capital Harare. Avalon plans to spend up to $5 million in 2018 to prepare for the construction of a pilot production facility that could be ready in 2019, he said.
Exact chemical specifications is key for the lithium market, placing an onus on exploration companies ensuring that they have the right resource for the requirements of the battery market, Bubar said. Flexibility is also important, as the technology employed in the lithium battery is a work-in-progress and could still evolve, he said. In that regard, having two types of lithium ore at Separation Rapids gives the company more options going forward, he said.
Matt Craze has covered commodity markets for more than 20 years, working as a researcher at CRU International, and for over 10 years as a ... <Read more about Matt Craze>