Avalon Advanced Materials Inc. is a Canadian Critical Minerals company focused on vertically integrating the Ontario lithium supply chain. The Company, through its joint venture with SCR-Sibelco NV, is currently advancing its Separation Rapids lithium Project near Kenora, ON, and continuing exploration at its Snowbank lithium and Lilypad lithium-caesium deposits. Avalon is also working to develop its Nechalacho rare earths and zirconium project located in the Northwest Territories. This deposit contains critical minerals for use in advanced technologies in the communications and defense industries among other sectors.
INTERVIEW TRANSCRIPTS:
WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today are Scott Monteith, CEO, and President at Avalon Advanced Materials Incorporated, along with the company’s VP of Corporate Development, Andrew Ramcharan. The company trades on the Toronto Stock Exchange, AVL, and on the OTCQB, AVLNF. Thanks for joining us today gentlemen.
Scott Monteith: Well, thanks for having us, Juan. I guess I’ll start off with a little history of the company and then we can move into where we’re going. I joined the company in May ‘23, so almost two years ago. And at that point, historically, Avalon was a junior mining model, and it was run by geologists and managed by geologists for the most part. And in having that sort of a model, the geologists collected quite a nice assortment of geological assets in Canada predominantly. And for 25 years as a junior minor, they basically accumulated the assets and sat on them, and as junior miners do, they were hoping to be eventually bought at, and they weren’t. So there came a time two years ago when the board decided that it was time to adjust the model away from being a junior miner and look at an operational model. And that’s why they asked me to join the company as the CEO, because I’ve spent 30 years scaling up technologies, typically clean technologies that come out of universities in North America.
I’ve built businesses in biodiesel refining, storm water and wastewater treatment, industrial gas separations for crackers, et cetera. So really, it’s all about air, water, and energy in my background, which is really what Avalon’s going to be participating in going forward. So, in a nutshell, when I joined, we very quickly identified Separation Rapids as a great asset to put a joint venture together. And by the end of June, 2023, we had commenced discussions with Sibelco out of Belgium. They’re a private global mining business. And we closed the first stage of the deal at the end of June ‘23, where they came in as the financing and operating arm of Separation Rapids.
Separation Rapids is an asset that Avalon owns up in Northwestern Ontario near Kenora. It’s a, it’s a joint venture that holds petalite resources and spodumene resources and cesium resources. The cesium and the spodumene are not drilled. So we don’t have specific measurements. But the petalite deposit at separation Rapids is drilled and it’s a very promising source of lithium rock, which will likely be used mostly in glass and ceramics production. So right now, we’re almost two years in with Sibelco, and we are slowly but surely scaling up that operation. The other asset that was on the books when I joined is Nechalacho, and I’ll cover that third, but we did create a second asset after the Sibelco deal. And that asset came in the form of a property that we purchased in Thunder Bay. A 400 acre heavy industrial zoned property right on Lake Superior.
It’s strategically located to facilitate the province of Ontario, as well as the Northeastern US states. And we can even ship globally by water from that location. Again, it’s a 400 acre site where we plan on building a large lithium hydroxide converter. And the converter will be put together by Metso out of Finland. And Andrew and I, and our team, including Mark Ashcroft, who we recently brought aboard the bus are looking to secure the capital stack to fund the construction of the first phase of the converter. And we’re expecting the first phase to be completed by the end of 2028 beginning of 2029. The converter is a — it’s really an environmentally friendly process, non-acid based, and it’s a process that produces lithium hydroxide, which will be used to fill the battery canisters for the electric vehicle industry in Ontario, Northeastern US. And we’ll also be producing [analsine?], which is basically clean sand. That’s the by product, and which will be a fabulous material to be used in the concrete products world, including the construction of highways.
So we’re very excited about the property. We’re very excited about the prospects of the company that we put together. The company that we put together to oversee everything in Thunder Bay is called Lake Superior Lithium Inc. We brought Mark Ashcroft in to help us scale that up. And Mark, he’s a professional engineer with an MBA. He’s had experience on Wall Street and Bay Street and Bond Street. I think he’s also worked in South Africa.
And he’s extremely excited about the opportunity in Thunder Bay. So we’re literally at the starting line of that project. We’ve been organizing financing from provincial and federal government sources in Canada as well as private sources globally. And again, the first phase will require about $1.5 billion in spend. And it’s a very interesting moment to be planning such a project just basically due to the electrification of the economy initiatives that we’ve been witnessing over the past few years. And in spite of a few of the hiccups that we’ve been experiencing, we do have a long-term bullish perspective on the electric vehicle opportunities.
Lastly, as far as the operating assets are concerned, we have Nechalacho. Nechalacho is a very unique asset and I’ll let Andrew talk a little bit about it in a minute ’cause he’s got a very good perspective on it. But it’s an asset that was formed many, many, many, years ago, millions of years ago, when an asteroid collided with Earth. And in colliding with Earth, it formed an exceptional asset that is unique. It’s a rare earth resource with as many as 15 elements on site. We like to call it a never ending resource. It’s massive. And given the geopolitical issues we’re facing globally now, we feel that Nechalacho would be a wonderful source of rare earths for the North American markets, including the US. We view it as a — forming a corridor to US processors from the Northwest Territory. So Nechalacho is about 200 kilometres outside of Yellowknife in the Northwest Territories.
It’s fully drilled. We have a full feasibility study on site, and we’re very excited about it. Andrew, do you have anything to add with regards to Nechalacho?
Andrew Ramcharan: No. I think you’ve covered it pretty well, so maybe if there’s any question, Juan can let us note specifically on it.
Scott Monteith: Great. And a couple of minor points. One we put in a shareholder protection plan recently, which was in the news. The reason we did that is because of the strong interest that global players are now paying towards rare earths which we’re a proud owner of a rare earth asset, a massive one. So it’s a very desirable asset. But two, we’re also, again, we’re turning our geological assets into scaled up operating businesses. And we just want to protect our shareholders from any unexpected interest from the market. We have one or two non-strategic assets as well. One is called East Kemptville, which is a material resource of tin. It’s in the Halifax, Nova Scotia area, and we are looking to put that into process. So we are looking to monetize some of the non-core assets.
WSA: What makes the project unique from some of that of some of other players in the sector?
Scott Monteith: Well, as far as Nechalacho?
Juan Costello: Correct.
Scott Monteith: Yeah. Maybe Andrew, do you want to talk to the engineering qualities that make it unique? Geological qualities?
Andrew Ramcharan: Yes. So Nechalacho is on the West Coast and it’s a deposit that has 15 out of 17 critical rare earth elements. And as we recognize the world is a different place today, and rare earth minerals are taking the front street. So what’s happening there, some of the minerals are basically used in space technology, communications, a lot of different purposes that we recognize the world now wake up. And the West is realizing that the high demand for it. And the great thing about this, there’s some projects like in California and stuff like that, but they don’t contain the amount of minerals that this project does. This project at one time on standalone was worth over a billion US dollars market capitalization, ring the bell on the New York Stock Exchange. So what has happened, we’re recognizing now is that these minerals are playing a crucial role in how the world is working right now.
And a lot of effort and timing is going into this from Avalon’s standpoint to make the world aware of what’s going on. We haven’t to our best knowledge found a deposit of this nature in terms of how many elements it has in the entire world. So this uniqueness of this deposit, and we have a feasibility study that’s done on it. So we spent over 65 million US dollars on this project. It has some infrastructure on it. It’s at the phase to go to the next stage of getting into production. And some of the minerals are so rare that you can use an electric cars, wind turbines, smartphones, computer, speaker and defense communication, magnets. Magnets, it’s a big thing. And now we recognize the shortage because of the production and over 90% of production is coming from the east. And now we’re realizing this here. So this is one of a kind deposit that we believe it’s has a lot of value, and we are actively taking this to the next level.
WSA: Well, yeah. Good. What are the, main goals that you guys are hoping to accomplish there in the property as well as overall over the next three to six months?
Scott Monteith: Similar to what we accomplished with our Separation Rapids asset in creating a joint venture with a much larger company, we’re looking to leverage much larger companies to help us create value in the Northwest territories of the Nechalacho asset. Again, it’s a massive resource. So we do feel that having a larger partner involved with that resource is desirable. So we’re actively in process right now to set the table for that kind of a joint venture to be established.
WSA: Right. And yeah, overall, as far as the growth, what are — obviously you’re looking for shareholder value, but what are the main synergies that you look for in possible JVs or other alliances?
Scott Monteith: Everything from the actual mining of this resource to the processing of the resource. And, we’re again a — when Avalon grows up, it’ll be an asset manager. So we’re looking to bring in the operators to make a reality of these projects, again, metaphorically similar to our Separation Rapids asset. Our separation Rapids asset, again, is going to be financed and managed by Sibelco and Avalon is a minority stockholder in that joint venture. We own 40% of Separation Rapids, where Sibelco owns 60%. So we’re expecting to see a similar situation in our other resources. And with regards to our lithium hydroxide refinery that we’re going to be constructing in Thunder Bay, that’ll be a joint venture which will consist of probably four or five players. We’re going to have processors and OEMs and other sources of private capital, like private equity joining the mix in that joint venture.
WSA: Sure. Yeah. While I have you guys on, can you talk a little bit more about your background and experience and how your interests align with that of shareholders and potential investors?
Scott Monteith: Sure. Do you want me to start, Andrew?
Andrew Ramcharan: Yep.
Scott Monteith: And then you can run — I’ll keep it short. I’ve owned and built about 12 different businesses one of them being a refining business. And a lot of those businesses were founded on patent portfolios that my company bought from universities in Canada and the USA. We built BIOX, which was one of the early biodiesel refining businesses. And we built it on a portfolio of patents that we purchased from the University of Toronto. We raised several hundred million dollars to build the first commercial refinery in Hamilton, Ontario and it was a big technological success. And it’s still operational today and produces several billion dollars a year worth of biodiesel. And biodiesel is a liquid fuel that is carbon neutral. And the reason we were excited and interested about biodiesel was because of the coming carbon initiatives that we were expecting.
So that’s 1 reason why Avalon thought I’d be a good fit, because they’re trying to accomplish a similar thing in Thunder Bay with lithium hydroxide refining. I’ve had a lot of experience in the environmental world. We are playing in the environmental world with Avalon and with environmental industries you have to really have the full gamut of marketing activities, including government relations and public relations. And without government relations, it’s really hard to grow an environmental business. And when I refer to government relations, it’s really about disseminating information to regulators and policy makers and sharing information and the likes so that people can make the right decisions.
So with that experience, I think I’m a good fit for Avalon, given that that’s really going to help pave the way for the future of this company. And I’ve created some very big businesses out of very complex technology which I’m very comfortable in that world and that’s the world that we’re playing in within Avalon as well. So we’re dealing with big ticket complex technologies, scale ups and that’s consistent with my background. And I’m also very good at building teams and working with technical people and university people. I’m not an engineer, but I surround myself with brilliant engineers in all of the businesses that I’ve been involved with, including Andrew and also Mark Ashcroft here at Avalon. And with that, maybe, Andrew, would you like to introduce yourself and talk about your background?
Andrew Ramcharan: Yes. So I’m like, 22 years in the mining industry. I went to school mainly at Colorado School of Mines. So I’ve worked in Colorado for a while on the investment banking side. And I moved to Canada where I worked in the mines, and then I was on the M&A side with mergers and acquisition, and worked with big financing company like Sprout off of Bay Street. So I’ve been on Bay Street for a while. Raised significant money, put mines into production, did M&A around the world. So my key role is to advance some of these projects to see how best we can extract value for shareholders and to take these to the next level and get the word out globally that this is Avalon. It used to be a billion dollar market capitalization. So coupled with my skill set, and Scott, we believe we are on the right path to take this company to the next level. So that’s me and some. I have a very strong technical and financial background, mainly in the US and Canada and I have worked in the industry over 20 years on multiple executive roles.
Scott Monteith: Yeah. Mark Ashcroft, just to highlight his background, he’s been brought in to make a reality of the Lake Superior Lithium Inc Joint venture and he’s had experience in quite a few different gold mining operations. He’s worked in mining finance businesses both in London and in New York. And he’s got a — again, he’s a mining engineer and an MBA in finance. And we have Zeeshan Syed who was here when I joined the company. He’s been here for roughly four or five years. And Zeeshan’s background is in politics and energy. So we have a fairly nice mix of management here and experiences to help make a reality of what we’re planning.
WSA: So yeah, right now current US share price about 2 cents a share market cap about 13, 14 million. So yeah, before we conclude here, why do you believe investors should take a look and consider the company as a good investment opportunity at this point today?
Scott Monteith: Sure. I’ll start off and then I’ll hand the mic over to Andrew. But really it’s a classic, the sum of the parts are much greater than the whole. And just the nature of the commodities markets with lithium, et cetera, have pushed us downwards. We feel that our current financing set up is — it’s sort of detrimental to raising your stock price. So we’re working to change the financing model here at Avalon so that we can start to see an increase in our stock price. And more importantly with making realities out of the different assets that we currently own and turning them into global businesses. I think that’ll definitely be reflected positively in our share price. Andrew, do you have any comments?
Andrew Ramcharan: Yes. I think based on, you mentioned there one being that where our market cap and our share price is, it’s obviously a good time to be getting in very early because recognizing that you know, the world, is a different place. And if you want to be self-sufficient and be dependent on your own natural resources, this is the time because we have — if in our portfolio we have some of the minerals that are in such high demand that’s creating a lot of these issues that’s happening globally. So while Nechalacho doesn’t have some of those, we have other deposits that has like cesium tantalum that’s required in the current trade issues that’s happening. So getting in early in the stage in the game, always making the calls technically and from what we have, our team, our assets, we believe this is the time for potential shareholders to have a closer look and see the true valuation of the company. Because previously, a year ago, rare earth and critical minerals weren’t that on the global radar scale. And Avalon is one of the companies that contains quite a lot of those minerals. So we believe this is a true value creation story.
Scott Monteith: Yeah. And I didn’t mention we expect to ride the wave if the commodities markets improve. So that’ll certainly help Avalon and Avalon shareholders for sure.
WSA: Well, we certainly look forward to continuing to track the company’s growth and report on the upcoming progress. And like to thank you guys for taking the time to join us today and introduce our investor audience to Avalon. It was great having you on.
Scott Monteith: Great. Well thank you for the invitation, Juan, and thanks for allowing us to expose the value behind Avalon.
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