Avalon Advanced Minerals Inc. [AVL-TSX; OTC-AVLNF] said Wednesday February 17 that it entered into a binding letter of intent to purchase a private Ontario company which owns four industrial minerals properties and a demonstration-scale processing plant in Matheson, northern Ontario.
Among the property assets owned by the private company is an asset transfer agreement giving the company the right to acquire full title to the Cargill Carbonatite Complex near Kapuskasing, Ontario. This carbonatite complex hosts significant concentrations of a number of critical minerals, contained both in bedrock and in the tailings from a historic phosphate mining operation at the site.
Avalon said work completed by the private company has shown that the tailings contain phosphate levels ranging from 15-20% P2O5 and can be sold “as is” for use in various agricultural fertilizer products. Sales of these phosphate-rich tailings are already generating revenues for the private company, with considerable potential for growth as demand for phosphate mineral products is increasing.
Analytical work done by the private company and Avalon on the tailings to date indicates the presence of significant concentrations of rare earths, scandium, and zirconium, which preliminary test work indicates will be recoverable through additional processing of the tailings.
“This provides significant potential for future revenue growth,” Avalon said in a press release.
Total purchase price to be paid by Avalon will be $16 million, payable in a combination of cash and common shares over two years. The initial payment of $200,000 in cash and the issuance of 1.0 million common shares priced at the 5-day volume weighted average trading price of Avalon’s common shares on the TSX is due and payable upon signing.
The balance is payable in instalments at six-month intervals with the next payment of $900,000 due on August 15, 2021, with Avalon having the option to make 50% of the next payment in common shares at its discretion.
Avalon will also assume responsibility for managing all of the private company’s ongoing operations upon posting of a $23.7 million letter of credit with the Ontario government to meet closure plan financial assurance requirements at the Cargill site.
Avalon owns a diverse critical metals and minerals property portfolio that offers investors a window to rare earth elements, lithium, tin, indium, cesium and tantalum.