Avalon Rare Metals Inc. moved a step closer to becoming a rare earth producer with the decision by the Mackenzie Valley Environmental Impact Review Board that the Nechalacho Rare Earth Element Project can proceed to the regulatory phase for approvals.
The Nechalacho Rare Earth Element Project consists of two distinct sites: the Nechalacho mine site, at Thor Lake, near the the North shore of the East Arm of Great Slave Lake, and the Hydrometallurgical plant site at Pine Point, approximately 85 km east of Hay River on the South shore of Great Slave Lake. The proponent proposes to barge the ore across the Lake for processing.
Total Project construction capital costs are $1.575 billion, which is inclusive of a 13% contingency and $122 million in sustaining capital. Of the total capital costs, approximately $1.152 billion is expected to be incurred in the Northwest Territories. The key factors going forward influencing the timely execution of the Project are: securing a strategic or financial partner, timely receipt of all requisite operating permits and approvals, securing sufficient binding agreements for offtake to support project financing, and the availability of equity and debt financing at a reasonable cost. Optimistically the company hopes to be in production by 2017.
Avalon plans for the construction of a 2,000 tonne per day underground mine and concentrator. This facility is expected to ramp up to its design capacity of 730,000 tonnes a year within six months after commencement of mining. The mine will be developed as a cut and fill operation with lower-cost long hole stoping methods used in the thicker parts of the ore body. Mine access will be by ramp, with primary crushing underground. The concentrate would be transported to lake shore and across Great Slave Lake to Pine Point where further processing will occur at a hydro-met plant. Final refining would occur in Louisiana.
The NWT operations will employ 320 people when in full production.
Avalon is listed on the TSX (ticker AVL) and trades at $0.75/share. It has a market cap of $77M.
Avalon has passed a major hurdle on gaining the green light from the regulator. It is an attractive long term ore body. The company seems to have assembled a top notch team to move the project forward. Yet this is a $75 M company trying to launch a $1.5B project in a tough capital market.