NORTHWEST TERRITORIES
The development of the Nechalacho rare earth minerals deposit near Thor Lake, NWT will not include an intermediate hydrometallurgical processing plant at Pine Point.

The work camp at Avalon Rare Metals Inc.'s Nechalocho project at Thor Lake, located about 100 km southeast of Yellowknife. The recent announcement of a strategic refining agreement with Salvoy metal is seen as an important step forward in securing financing for the mine, according to CEO Don Bubar. - courtesy of Avalon Rare Metals Inc.

On March 3, 2014, Avalon Rare Metals Inc. announced what CEO Don Bubar described as a crucial step forward in the development of the Nechalacho deposit. The Toronto-based company has made a 10-year agreement with Savoy SA, headquartered in Belgium, to develop and bring to market the Thor Lake rare metal deposit.

“It’s the kind of breakthrough we were looking for to get the project over the hump in terms of accessing capital and moving it into the next phase,” Bubar said. “It’s big, big news.”

Solvay is a multinational corporation with locations in 55 countries and more than 29,100 employees worldwide. In 2012, it reported $19.5 billion in revenues, and is a world leader in processing and refining the rare earth metals Avalon plans to extract.

“Solvay does that better than anyone else,” Bubar said. “They’re number one in the world, both inside and outside China on rare earth refining.”

Rare earth metal processing is not a straightforward proposition. An Avalon-built refinery in Louisiana as well as an intermediary processessing facility near Pine Point were part of the initial project plan.

This agreement with Solvay means Avalon will not build its own refinery in Louisiana.

“There’s a lot of uncertainty around (building) your own refinery as we originally envisioned,” Bubar said. “A refinery is not easy to build, get running and commissioned on any predictable timeline. They’re (also) tricky to get producing the product to precisely the customer’s satisfaction.”

Assuming the responsibility of building a rare earth metal refinery creates uncertainty among potential buyers of the finished products. Customers are, Bubar noted, reluctant to enter into firm agreements to purchase product if there is any doubt the product can be delivered on time and to required quality standards.

“It’s seen as a risk factor,” Bubar said.

Avalon will still have to build an intermediate processing facility, but the plant will not be built in the NWT. According to Bubar, Solvay is advising Avalon on the specifics of the intermediary refining process to best fit with Solvay's La Roche refinery. Altough Avalon initially considered a Pine Point facility feasible, it is not longer an option.

“It’s not conceivable to do it in the NWT,” Bubar said. “There’s insufficient infrastructure or critical availability of chemicals and solvents we need for the process. It’s going to be somewhere else, we haven’t decided where, but it won’t be in Pine Point.”

Bubar said Solvay has unused capacity at their La Rochelle, France, processing plant. The Avalon deal is the result of several years of discussion between the two companies and represents Solvay’s interest in Avalon’s potential as a rare earth metal producer, as much as Avalon's interest in securing a solid refinery option.

“They were looking for a producer of a mixed heavy earth product,” Bubar said. “They identified us as the leading potential producer of such a heavy earth mixed product in the world.”

The binding 10 year agreement between the two companies may be the signal the investment market needs to make final investment decisions in Avalon’s proposed project. More than $1 billion in financing will need to be raised.

“This is a key catalyst we needed,” Bubar said. “Our hope is to get some commitments withing months so we can start to put together the bigger project financing over the rest of 2014, and be in a position to get going with real work on-site and start developing in 2015.”

Avalon’s Thor Lake rare earth metal project is projected to employ up to 225 people during at least 20 years of production. Potential reserves exist to extend the mine life well beyond 20 years.

“It’s multi-generational in its potential lifespan,” Bubar said. “That’s how we like to characterize it.”