Inferred tonnes drive rare earth growth in Avalon update

An updated resource estimate for Avalon Advanced Materials’ (TSX: AVL; US-OTC: AVLNF) Basal zone at its Nechalacho rare earths project in the Northwest Territories raises the global contained resource by 42%, as the company prepares a new economic study later this year.  

The update outlines 58.6 million measured and indicated tonnes grading 1.49% total rare earth oxides (TREO) for 875,000 tonnes of contained TREO, 14% lower than for the same categories in the 2013 feasibility study, Avalon reported Thursday. Growth in the update is mostly in the inferred resources, which more than doubled to 130.6 million tonnes at 1.31% TREO for 1.7 million contained tonnes. Nechalacho is about 100 km southeast of Yellowknife.  

Higher economic threshold

But though the latest estimate shows a more modest resource at Nechalacho, it also uses a net metal return cut-off of US$366.40 per tonne, 14% higher than the cut-off used in the 2013 report. That higher threshold would exclude lower-value material at the project.

"Nechalacho offers exposure not only to the four principal magnet rare earths—neodymium, praseodymium, dysprosium and terbium—but also to an exceptionally broad suite of other light and heavy rare earth elements together with zirconium, niobium and tantalum,” Avalon CEO Scott Monteith said in a release. 

"At a time when governments and industry are increasingly focused on establishing secure Western supply chains for critical minerals, Nechalacho represents a unique opportunity: a large, extensively studied Canadian resource containing meaningful concentrations across a broad range of commercially important rare earth elements.”

Among continent’s largest

Basal remains one of the largest rare earths deposits in North America by contained tonnes and among Canada’s top four for rare earths. The update comes as Avalon prepares to release a new preliminary economic assessment for Nechalacho in the fourth quarter and as the Northwest Territories government seeks new mining projects to fill the economic gap left by shuttered diamond mines.

The resource update is based on about 120,000 metres of drilling across 582 holes. 

Basal could produce 9,300 tonnes of total rare earth oxides (TREO) annually over a 20-year mine life, according to the feasibility study, with the project’s post-tax net present value pegged at $1.3 billion using an 8% discount rate. It has an after-tax internal rate of return of 20% and capital costs of $1.6 billion, which the company has acknowledged could rise due to inflation.

While the 2013 feasibility study outlined proven and probable reserves for Basal, those estimates weren’t carried into the update, Avalon said.

Vital shares site

Vital Metals (ASX: VML; US-OTC: VTMXF) owns the Tardiff portion of the Nechalacho deposit. Vital’s rights to Tardiff extend from surface to about 150 metres depth and Avalon’s from 150 metres and deeper.

Tardiff is estimated to be a smaller operation than Basal and was briefly Canada’s first-ever producing rare earths mine on a demonstration-scale basis during 2021-2023. Mining ended due to cost overruns, market difficulties and the bankruptcy of Vital’s processing subsidiary in Saskatoon, Sask. 

Avalon shares fell 2% to $4.89 apiece on Thursday morning in Toronto, valuing the company at about $22.8 million. The stock has traded in a 12-month range of $4.52 to $27.