Avalon Advanced Materials arranges $15 million convertible loan deal
Avalon Advanced Materials Inc. [AVL-TSX, OTC-AVLNF] said Monday it has entered into a $15 million convertible security funding agreement with Lind Global Fund 11, LP, an entity managed by The Lind Partners a New York-based institutional fund manager.
Proceeds from the first draw down will be used to accelerate the work program for the company’s planned lithium processing facility located in Thunder Bay, Ont., including the initiation of a preliminary economic assessment (PEA). Proceeds will also be used to cover working capital requirements.
The first drawdown on the Funding Agreement will be for $2.75 million and is expected to close within the next two weeks. Subject to further agreements by the parties, additional drawdowns under the funding agreement can be made upon satisfaction of certain conditions.
The convertible security to be issued under the first drawdown will have a two-year term and will accrue a simple interest rate obligation of 10% annually on the funded amount, which is prepaid and attributed to the face value of the convertible security upon issuance, resulting in a face value of $3.3 million.
Lind will be entitled to convert the face value amount over a 2.0-year period, subject to certain limits, at a conversion price of 85% of the five-day trailing volume weighted average price of Avalon’s common shares prior to the date of conversion.
The convertible security matures 24 months after closing. Starting 30-days after the expiry of the 4.0-month statutory hold applicable to the convertible security, Avalon can repurchase the convertible security, subject to Lind’s option to convert up to one third of the face value into Avalon common shares prior to such purchase.
On Monday, the shares were unchanged at $0.085 and trade in a 52-week range of 17.5 cents and $0.08.
Avalon is a lithium-focused mineral development company engaged in advancing critical mineral projects to support the North American battery supply chain. Avalon has been focused on developing its Separation Rapids Lithium Project, near Kenora, Ont., while continuing to advance other projects, including the 100%-owned Lilypad Spodumene-Cesium-Tantalum project near Fort Hope, Ont. Avalon is also working to develop the Nechalacho rare earths and zirconium project in the Northwest Territories.
The company recently finalized the purchase of a383-acre industrial property with access to a deep water port, rail, road and other infrastructure in Thunder Bay, Ont. It said the site provides an ideal geographic location for a lithium processing facility, half way between lithium deposits in northern Ontario and EV battery plants in the south.
The move came after Ontario Premier Doug Ford recently revealed Ontario’s interest in establishing new battery materials supply chains in the province.
The proposed lithium hydroxide conversion facility remains an important part of Avalon’s growth strategy. The company said it would accept concentrates from other producers of lithium minerals from the many pegmatic deposits that occur in northern Ontario.