Avalon Advanced Materials Inc. [AVL-TSX, OTC-AVLNF] said it has completed $3.5 million in convertible debenture financing from its joint venture partner and major shareholder, SCR-Sibelco NV of Belgium. The proceeds will be used to fund the advancement of Avalon’s Lake Superior Lithium project in Thunder Bay, Ont., the Nechalacho REE and Zirconium Project in the Northwest Territories and for working capital and general administrative purposes.
Sibelco is a global leader engaged in mining, processing and selling specialty industrial minerals, including high purity quartz, silica, clays, feldspathics and olivine. The company is also involved in glass recycling. Based in Antwerp, Sibelco Group has production facilities in over 30 countries.
Sibelco has provided additional funding of $3.5 million to Avalon by way of an amended and restated debenture. The debenture replaced the company’s existing $3.0 million convertible secured debenture (dated June 14, 2023, and amended on November 9, 2023) and have a principal amount of $6.5 million, Avalon said in a press release.
“We are very pleased to have secured this new $3.5 million financing from our joint venture partner Sibelco,’’ said Avalon CEO Scott Monteith. “We are preparing our new mineral resource estimate at the Separation Rapids joint venture project, and this new funding will enable us to accelerate the technical studies on our Lake Superior Lithium project,’’ he said.
Avalon shares eased 11.1% or $0.005 to $0.04 on Monday. The shares trade in a 52-week range of 12 cents and $0.04.
Avalon has applied for both provincial and federal funding in support of the Lake Superior Lithium Project in Thunder Bay. Avalon also recently published the results of a preliminary economic assessment (PEA) on September 3, 2024, showing positive results, including an after-tax net present value (NPV) of $4.1 billion at an 8.0% discount rate and Capex of $1.3 billion.
The debenture bears interest at 7.5% annually, with the principal and accrued interest payable on maturity, which occurs on November 18, 2026. Should the debenture not be repaid by Avalon at maturity, Sibelco can either convert the outstanding principal and accrued interest into additional common shares of Avalon, or convert the outstanding principal and interest into additional common shares of the Avalon-Sibelco joint venture company, Separation Rapids Ltd. (SRL), based on a pro-rated formula.
If the entire amount of the debenture and accrued interest is converted at maturity, then Sibelco’s joint venture interest in Separation Rapids would increase to 30%. This would result in a change in the participating interest of Sibelco and Avalon in SRL to 90% and 10% respectively. Sibelco will also have the right to exercise its conversion rights prior to maturity if Avalon does not make certain reductions in its corporate and administrative costs. The debenture will continue to be secured by a pledge of Avalon’s shares in SRL.
