Separation Rapids Lithium -Tantalum Project, Kenora, Ontario
Project Background
The Separation Rapids property is host to one of the largest rare metal pegmatite deposits in the world. Known as the “Big Whopper” it is only the fourth example in the world of a rare metal pegmatite with the size required to be of major economic importance and only the second to be enriched in the rare lithium mineral called petalite. The deposit is a potential source of lithium minerals for use in the glass and ceramics industry and is now also being evaluated for a new application in a high-strength, non-combustible composite material.
The Separation Rapids property now consists of ten mineral claims totalling 90 claim units, covering approximately 3,600 acres owned 100% by Avalon. The property is located in the Paterson Lake Area, Kenora Mining Division, Ontario. The original vendors retain a 2.0% net smelter return (“NSR”) royalty interest in the property, of which 1.0% can be bought back at any time for $1,000,000.
The Separation Rapids property is situated approximately 70 kilometres (“km”) by road north of Kenora, Ontario and is directly accessible via a newly-constructed private road. The main line of the Canadian National Railway passes through the village of Redditt, just 50 km by road south of the Separation Rapids property. The property lies within the traditional land use area of the Wabaseemoong Independent Nations of Whitedog, Ontario, an aboriginal community located approximately 35km southwest of the property
Project History
Since acquiring the property in October 1996, Avalon has invested over $4 million on exploration and development work including a comprehensive pre-feasibility study that was completed in 1999 by independent consultant Micon International Inc. This study was based on a business model involving production of high purity concentrates of petalite for sale to glass-ceramics manufacturers such as Corning for use in its famous Corningware cookware. The Company was unsuccessful in advancing the project on this basis following the shutdown of the Corningware manufacturing facility in the U.S. in 2001.
In 2000-2001, during a period of increased demand for tantalum, the Company completed follow-up work including additional exploration drilling and metallurgical testwork for tantalum, follow-up market studies and a plant design study to provide more detailed capital and operating cost estimates for both the pilot scale and full scale ore processing facilities. However, the tantalum grades in the deposit did not justify development as a tantalum producer on a stand-alone basis, particularly once demand and prices for tantalum began to fall in 2002.
In 2002-2003, Avalon completed a Scoping Study to evaluate an alternative development concept for the project which involved producing a diluted petalite product called “high-lithium feldspar”. The concept was based on application of a simple dry processing technique to remove the iron and tantalum-bearing minerals by magnetic separation and aggregating the feldspar and quartz with the petalite into a material to be marketed as a low-cost lithium-enriched glass sand. Subsequent process testwork on a six tonne bulk sample and crucible melt studies demonstrated that an acceptable quality product could be produced which would have the advantage of lowering the melting temperature of the glass batch, thereby reducing the manufacturers’ energy costs and emissions of greenhouse gases.
With increasing energy prices and concerns about climate change related to greenhouse gas emissions, interest in lithium additions to glass formulations is increasing, creating new opportunities for lithium minerals producers. The Company is continuing to investigate these opportunities and periodically produces small test samples for laboratory evaluation by potential customers.
In 2005, a potential new market for the petalite ore was identified as an ingredient in a new non-combustible composite material with various potential construction applications. The untreated crushed petalite ore could be used directly in the manufacturing process for this material, creating an interesting development opportunity for Avalon. In 2006, a 300 tonne bulk sample of the ore was extracted and crushed for delivery to the customer for its own product development purposes. Deliveries of this material began in early 2007 but have since been discontinued, while the customer, a development stage company, attempted to raise additional capital. There has been no word as to when shipments might resume to this customer.
Geology and Resources
The geological mapping and diamond drilling work done by Avalon have delineated the Big Whopper pegmatite system over a strikelength exceeding 1.5 km, with widths ranging from 10 m to 80 m and to a vertical depth of close to 300 m, where it remains open. It consists of a vertically oriented massive petalite pegmatite dyke striking 280º, hosted by metamorphosed mafic volcanic rocks (amphibolite) and flanked by a swarm of narrower albite and petalite dykes. These have all undergone intense deformation in a high strain zone resulting in folding, boudinage, and shearing.
The 1997-98 drilling program delineated an indicated petalite resource of 8.9 million tonnes and an inferred petalite resource of 2.7 million tonnes both grading 1.34% Li2O, 0.007% Ta2O5 and 0.30% Rb2O. These resources are delineated over a strikelength of 600 m, to a maximum vertical depth of 250 m and remain open for expansion both to depth and along strike. The lithium and rubidium grades are consistent with a petalite content averaging 25±5% and an Rb-K-feldspar content averaging 10 to 15%, with the rest of the rock consisting mainly of albite, muscovite, lepidolite, and quartz. Important accessory minerals include spodumene, spessartine, cassiterite, and columbite-tantalite, the principal ore mineral for tantalum.
The mineralized zone is well exposed at surface in a low dome-shaped hill, where it averages 55 m in width over a 400 m strikelength, and will, therefore, be readily amenable to mining by low-cost quarrying methods. A conceptual open pit designed for the pre-feasibility study by Micon International contains a probable reserve of 7.72 million tonnes grading 1.4% Li2O, (NI43-101 audited) which is the reserve used for present planning purposes.
Marketing
The Big Whopper is unusual in its enrichment in petalite as the dominant lithium mineral in the ore and in the degree of structural deformation that it has undergone. This resulted in homogenization of the original mineralogical zoning characteristics of the pegmatite into a relatively uniform chemical composition, a circumstance that appears to be unique in the world. Under the original development scenario, this characteristic presented a challenge in processing the ore to produce a high quality petalite concentrate, a challenge that was eventually overcome with the development of an efficient froth flotation process at Lakefield Research Limited.
This development concept took advantage of the inherent homogeneity of the ore to produce the blended high-lithium feldspar product using a low-cost dry milling process and potential markets for this potential product are still being investigated. The project is well-situated in terms of proximity to major railway lines providing ready access in to the main target markets in the glass and ceramics industry which are located in the midwestern and southwestern U.S.
In 2002, Avalon engaged the services of Amalgamet Canada (“Amalgamet”) as its sales and marketing agent. Amalgamet is experienced in the marketing of similar products to the glass and ceramics industries, including lithium minerals. Amalgamet continue to actively promote the use of lithium minerals in the glass and ceramics industry, and was responsible for identifying the new market opportunity in 2005. Increasing demand for lithium ion batteries has increased prices for lithium carbonate making it less competitive with lithium minerals in many glass applications. Amalgamet continues to believe that lithium use by North American glass manufacturers will eventually increase because of the benefits it offers with regard to reducing glass furnace energy requirements and greenhouse gas emissions.
Environmental and Permitting
The project benefits from a lack of environmental issues due to the fact that the ore is environmentally benign, containing no toxic, radioactive, or acid-generating minerals. Avalon completed environmental baseline studies in the project area in 1999, ensuring that local environmental sensitivities were identified at an early stage. This study was updated in 2006-7.
Current bulk sampling and site development work is being done under an Advanced Exploration permit originally granted by the Ministry of Northern Development and Mines in 2000. The Company plans to take the property to lease in 2008 in anticipation of further larger scale bulk sampling and project development work.
Avalon has also been proactive in establishing a dialogue with the First Nations of the area, and in August, 1999 signed a Memorandum of Understanding with the Wabaseemoong Independent Nations of Whitedog, Ontario to address community concerns regarding new resource development in their traditional land use area, access to employment opportunities and other benefits. Whitedog is situated just 35 kilometres southwest of the Separation Rapids property and is the closest community to the project site. Avalon fully intends to develop the project in co-operation with Wabaseemoong and continues to keep the community leadership well-informed on new developments.
Current Work and Future Plans
In 2007, Avalon initiated a research project to investigate the potential application of hydrometallurgical extraction technology to recover a lithium product suitable for the rapidly growing lithium ion battery market, while continuing to investigate other potential lithium minerals markets. The metallurgical research work is being carried out at SGS Lakefield Research under the supervision of Ian London, P.Eng. Such technology has been successfully applied to other lithium minerals and initial literature research indicates this technology should be effective with the petalite that is the dominant lithium mineral at Separation Rapids. A positive result would lead to a preliminary economic assessment of developing the project as a lithium chemicals producer.
The Company continues to receive periodic expressions of interest in its lithium minerals product and delivered several small test samples to potential customers during 2007. One such lead appears to hold significant promise as a potential large volume customer and efforts are being devoted to identifying potential process facilities to produce a large volume product sample for this customer. Increasing interest in lithium additions to various glass and ceramic formulations has motivated the Company to consider increasing its product marketing efforts generally to the glass and ceramics sector in 2008.
