AVALON RARE METALS INC.
Thor Lake Rare Metals Property
Avalon Thor Lake Animation
Location and Ownership
The 100% owned Thor Lake Rare Metals Project is located in the Mackenzie Mining District of the Northwest Territories, about 5 kilometres ("km") north of the Hearne Channel of Great Slave Lake and approximately 100 km southeast of the City of Yellowknife. The property is directly accessible from Yellowknife by float or ski-equipped aircraft. Topography is typical of the Canadian Shield, gently rolling with abundant bedrock exposure with glacial till cover, numerous shallow lakes. Vegetation is dominated by spruce and poplar which do not grow to a size to be harvested economically. Climate is characterized by long, cold winters extending from October through April, and short, pleasant summers. It is a semi-arid with low annual precipitation levels.
The Thor Lake property is comprised of five contiguous mining leases totalling 10,449 acres (4,249 hectares ("ha")). The mining leases have a 21-year life and each lease is renewable in 21-year increments. The property is subject to two underlying royalty agreements entitling the royalty holders to a cumulative 5.5% Net Smelter Returns Royalty.
The property is situated in an area known as the Akaitcho Territory which is subject to a comprehensive land claim negotiation between four communities of the Dene First Nations and the federal government. At the present time, there is an interim measures agreement in place and under this agreement an interim land withdrawal was implemented in 2007, which precludes new mineral title from being granted by the Crown in the Akaitcho territory for a period of up to five years while a land-use planning process is completed. The rights of existing mineral rights holders in the area are unaffected and Avalon is actively consulting with the four Akaitcho Dene Nations with a view toward implementing a co-operative development approach for the Thor Lake Project.
General Geology and Mineralization
The Thor Lake rare metals deposits are hosted by the peralkaline Blachford Lake intrusion, an Aphebian-age ring complex emplaced in Archean-age supracrustal rocks of the Yellowknife Supergroup. The principal rock types in the intrusion are syenites, granites and gabbros and associated pegmatitic phases hosting rare metal mineralization.
Five distinct zones or deposits of rare metal mineralization have been identified to date on the Thor Lake property as being of potential economic interest. They are the North T, South T, S Zone, R Zone, and Lake Zone. The Lake Zone is the current top priority due to its large size and enrichment in the REE, which are in growing demand. It also contains significant yttrium, tantalum, niobium, gallium and zirconium mineralization. The Lake Zone is particularly notable for its enrichment in the more valuable HREE such as europium, terbium and dysprosium, relative to light rare earths (LREE) such as lanthanum and cerium. It is a tabular hydrothermal alteration zone extending from surface to depths of 150-200 m exhibiting an internal zonation characterized by alternating sub-horizontal layers of of relatively high and lower grade REE mineralization. HREE are present in the Lake Zone in fergusonite ((Y,HREE)NbO4) and zircon (ZrSiO4), whereas the LREE are present in bastnasesite, synchysite, allanite and monazite.
The North T and South T deposits are mainly of interest for beryllium, although these zones also contain potentially recoverable REE, yttrium and niobium. The North T deposit is a strongly zoned pegmatite containing at least four distinct sub-zones explored from underground in the 1980´s. The predominant beryllium mineral in the North T deposit is phenacite, a rare high-grade beryllium silicate mineral (Be2SiO4) which, at an average BeO content of 24%, has more than double the beryllium content of the more common beryllium mineral beryl (Be2Al2Si6O18). The R and S Zones are mainly of interest for yttrium and REE. These two zones and the South T deposit are less advanced and require further exploration to determine their economic potential.
Exploration and Development History
Rare metal mineralization was first discovered in the Thor Lake area in 1976, by Highwood Resources Ltd. Since that time, over $12 million has been invested in exploration and development work on the property by companies prior to Avalon´s involvement. This included geological mapping, sampling, geophysical surveys and nearly 200 drill holes totalling some 13,000 m. This was followed by underground development work, bulk sampling, metallurgical testwork and market studies on the North T deposit.
In 1980, Placer Development Ltd. (now Placer Dome Inc.) carried out geophysical surveys and drilled 13 holes in the Lake Zone to test this zone for its tantalum and niobium potential. Placer drilled five additional holes in 1981, to follow up on the best niobium and tantalum values intersected in the 1980 program. After doing some initial metallurgical testing at Lakefield Research, in 1982, Placer decided to withdraw from the Lake Zone joint venture due to the complex metallurgy of the tantalum mineralization in the Lake Zone ores.
In 1983, drill core from early exploration holes in the R, S and T Zones was re-sampled by Highwood and assayed for beryllium, after the identification of the beryllium-bearing mineral phenacite in the ore assemblage. Results from this program indicated the presence of widespread beryllium enrichment in the North and South T Zones. In the fall and winter of 1983/84, more than 70 holes were drilled in these two zones, which established beryllium resources in both the North and South T Zone deposits. This drilling program also stimulated interest in niobium, zirconium, gallium, yttrium and REE´s as potential by-products.
In the summer of 1984, a 25 tonne bulk sample was collected from the high beryllium section of the North T Zone for initial metallurgical testing. In 1985, a 500 m decline was driven into the North T deposit. This decline went through all of the major zones with the intent of confirming continuity of the beryllium mineralization and collecting bulk samples for metallurgical testing. Some of the infrastructure used for this program remains on the site, including a fuel tank farm, a trailer camp, a garage storing a small bulldozer and a pick-up truck and one wooden building.
In August, 1986 the property was optioned to Hecla Mining Company of Canada Limited ("Hecla") which could earn a 50% interest in the property by completing a feasibility study and arranging financing to bring the property into production. After carrying out extensive metallurgical testwork, market studies and in-house feasibility study, Hecla decided to withdraw from the project in 1990.
Additional engineering and market studies were carried out by Highwood periodically through the 1990´s, which were mainly focused on the North T beryllium resource. This included a proposal to extract a large-scale bulk sample in 1997 that did not proceed due to difficulties in securing the required operating permits and control of Highwood subsequently changed hands several times with little new work being undertaken.
In 2001, Navigator Exploration Corp. ("Navigator") entered into an option agreement with Highwood related to the Lake Zone in response to an increase in world tantalum prices. Navigator´s efforts were focused on additional metallurgical research to improve tantalum recoveries and define a process for producing a marketable tantalum concentrate. These efforts were unsuccessful although subsequent review of this work by Avalon revealed that the tantalum bulk concentrate produced also captured a high concentration of rare earth minerals thus providing a starting point for designing a flowsheet for the Lake Zone REE ores. Navigator dropped the option on the property in 2004. In April 2005, Avalon completed the outright purchase of the property from Beta Minerals Inc., a successor company to Highwood, for 2.5 million common shares and 250,000 share purchase warrants.
2005-2007 Work Programs
In June 2005, Avalon initiated a re-evaluation of the economic potential of the Thor Lake property, focusing primarily on the rare earth elements. REE´s such as yttrium, europium and neodymium are now in much higher demand than they were in the 1980´s. Neodymium and some HREE´s are now used to make high intensity "super-magnets". Demand for such magnets is now being driven largely by the automotive industry where they have become an integral part of the electric motors and generators in fuel-efficient hybrid and electric cars. These magnets are now used in many modern electronics products such as computer disk drives and many other exotic applications such as magnetic refrigeration are being investigated for these magnets.
There was little historical data on the HREE content of the Lake Zone as these elements (with the exception of yttrium) were not systematically analyzed for during previous work programs. Initial assay results from a suite of samples collected in June, 2005 confirmed high levels of heavy rare earth enrichment over broad intervals in the Lake Zone and extremely high levels in select grab samples from the R Zone.
Results from the R Zone (reported in oxide form) include values of 8.51% Y2O3 and 8.62% Total Rare Earth Oxides ("TREO") which is the sum of all 14 REE´s in the lanthanide series. Concentrations of gadolinium, neodymium, and europium in these two samples were as high as 1.13% Nd2O3, 1.38% Gd2O3 and 0.12% EuO, respectively contained in xenotime. The highlight from the initial re-sampling of the Lake Zone drill cores was a 5.2 m interval in hole 81-1 which averaged 0.70% Y2O3 and 4.11% TREO containing 0.80% Nd2O3, 0.19% Gd2O3 and 0.02% EuO. This interval also displayed very strong tantalum enrichment averaging 0.11% Ta2O5 indicative of the presence of fergusonite as a primary REE-bearing mineral phase.
Additional re-sampling of historical drill cores was carried out in September 2005 with seven holes from the Lake Zone being completely re-sampled and assayed for the full suite of rare earths. This work was designed to begin to map out internal zonation patterns and was accompanied by detailed mineralogical studies. The results confirm the presence of elevated REE values throughout the Lake Zone and local zones of enrichment. One hole (numbered 80-9) averaged 0.98% TREO over its full 149.5 m length and included a 22 m interval averaging 3.22% TREO.
In 2006-7, Wardrop Inc. ("Wardrop") carried out a Preliminary Economic Assessment ("PEA") to model potential development scenarios for the Lake Zone REE deposit, confirm the economic potential of the REE resource and help in the design of a definition drilling program to define indicated resources in the higher grade portions of the deposit. This work involved estimation of inferred resources in the Lake Zone from existing drilling information supplemented by the recent analytical work.
As part of the same mandate Wardrop was also contracted to complete an audit of historical resources and reserves reported for the North T deposit, and this became a new resource estimate when it was discovered that there was a significant zone of yttrium + HREE mineralization that had not been included in the previously reported beryllium based resource estimates. The results are summarized below.
The PEA recommended further drilling in the Lake Zone to define potential REE-enriched sub-zones in the southern part of the deposit and upgrade the classification for this portion of the resource from the inferred to the indicated confidence level. A Phase 1 drilling program to begin testing the area located immediately south of Thor Lake was carried out from July 30 to October 15, 2007 at a total cost of approximately $1.1million. Drilling operations were supervised by J.C. Pedersen, P.Geo. and Dr. D.L. Trueman, P.Geo., under the overall direction of the Company´s Vice-President, Exploration, Dr. William Mercer, P.Geo. A total of 2,511 m were drilled in 16 holes of which three were abandoned short of the target depth. The assay results confirmed the presence of several 4 to 23 m wide intervals of relatively high grade REE mineralization, within a broad mineralized envelope averaging over 100 m in thickness.
NI 43-101 Compliant Resource Estimates, January 2007
Historic drilling information for the North T and Lake Zone deposits was entered into a new computer database and new resource estimate, compliant with guidelines defined under NI 43-101, were prepared by independent consultants Wardrop in January, 2007. These are summarized as follows:
North T Zone: Summary of Indicated Resources
|
SUBZONE |
CUTOFF % |
TONNES |
TREO + Y2O3% |
BeO% |
Nb2O5% |
|
C,D,E |
0.40 BeO |
498,409 |
0.72 |
0.98 |
0.50 |
|
F |
0.10 Ce2O3 |
43,877 |
6.50 |
0.16 |
0.01 |
|
Y |
0.04 Y2O3 |
593,815 |
0.45 |
0.08 |
0.59 |
|
TOTAL |
|
1,136,101 |
0.71 |
0.48 |
0.53 |
Y2O3 = yttrium oxide, BeO = beryllium oxide, Nb2O5 = niobium oxide
Reporting of REE analytical data is typically done as the sum of the rare earth elements plus yttrium in oxide form and reported as TREOs + Y2O3 (total rare earth oxides + yttrium oxide). Except for the LREE dominant mineralization in the F Zone, most of the REE mineralization found in the North T deposit occurs in the mineral xenotime in the following relative proportions in percent:
|
Element |
Y |
La |
Ce |
Pr |
Nd |
Sm |
Eu |
Gd |
Tb |
Dy |
Ho |
Er |
Tm |
Yb |
Lu |
|
Oxide % |
55.31 |
0.10 |
0.02 |
0.10 |
0.20 |
1.80 |
0.70 |
11.6 |
2.50 |
15.6 |
3.10 |
5.41 |
0.60 |
2.20 |
0.70 |
Lake Zone: Summary of Inferred Mineral Resources
|
CUTOFF% |
TONNES |
TREO+Y2O3% |
Ta2O5% |
Nb2O5% |
ZrO% |
|
0.10 Y2O3 |
14,005,000 |
1.23 |
0.025 |
0.33 |
1.73 |
|
0.05 Y2O3 |
83,224,000 |
0.99 |
0.025 |
0.31 |
1.96 |
|
0.01 Y2O3 |
375,410,000 |
0.41 |
0.014 |
0.22 |
1.19 |
ZrO2 = zirconium oxide, Ta2O5 = tantalum oxide
In the Lake Zone yttrium and the HREE´s occur in fergusonite in the following relative proportions:
|
REE |
Y |
La |
Ce |
Pr |
Nd |
Sm |
Eu |
Gd |
Tb |
Dy |
Ho |
Er |
Tm |
Yb |
Lu |
|
Oxide % |
29.05 |
0.30 |
4.40 |
1.70 |
15.6 |
10.4 |
1.60 |
14.3 |
1.80 |
9.80 |
1.20 |
4.10 |
0.70 |
4.40 |
0.7 |
The relatively high proportion of HREE´s in both deposits is key to their economic development potential as the HREE´s are much more valuable and in increasing demand for new magnet technology. Both LREE and HREE mineralization are found in the Lake Zone. The LREE´s mainly occur in bastnaesite, monazite, synchisite and allanite while the HREE´s plus yttrium mainly occur in a tantalum-niobium oxide mineral called fergusonite and zircon. Within the main mineralized body, there is a subhorizontal layer at the base that is relatively enriched in HREE and is referred to as the Basal Zone. This Basal Zone is present over much of the known extent of the Lake Zone. As well as REE, including HREE, the Lake Zone has other metals that may have economic potential such as niobium, tantalum, zirconium, hafnium and gallium. Avalon has not completed detailed studies of the economic potential of these other elements. Metallurgical work in the past has shown that niobium and tantalum may be difficult to recover, but little work has been done on the other elements. There is no significant beryllium mineralization in the Lake Zone.
Preliminary Economic Assessment
The highlights of the PEA completed by Wardrop Engineering were the confirmation of rapidly growing demand for REE from an independent market study prepared by BCC Research and confirmation that the Thor Lake REE project can achieve acceptable returns on invested capital and therefore warrants further investment to advance the project to a pre-feasibility or feasibility level of analysis.
In particular, discounted cash flow analysis of a base case scenario along with two variants reflecting the potential for increased production rates commensurate with the growth in REE demand forecast in the BCC report produced the following results (using a 5% discount rate):
|
Production Case tonnes per year Y+TREO |
ROI |
NPV @ 5% |
Mine Life (Years) |
|
North T + Lake Zone @ 500 tonnes / year |
18.7% |
$111,574,000 |
35 |
|
North T + Lake Zone @ 1,000 tonnes / year |
21.8% |
$159,180,000 |
18 |
|
North T + Lake Zone @ 2,000 tonnes / year |
26.7% |
$356,104,000 |
18 |
Y+TREO = Yttrium oxide plus total rare earth oxides. ROI = return on investment and NPV = net present value
The model assumes initial development of the North T Zone deposit with by-product recovery of beryllium with production transitioning to the much larger Lake Zone deposit in 4-5 years where tantalum and zirconium would also be recovered as valuable by-products to the REE´s.
Kevin Palmer, P.Geo. was the qualified person from Wardrop responsible for this resource estimation. Tim Maunula, P.Geo. of Wardrop reviewed his work and assisted with the development of the estimation parameters. David L. Trueman, Ph. D., P.Geo., who has direct experience with the project dating back to 1982, reviewed the data on behalf of the Company and assisted with interpretation where requested by Wardrop.
Scientific and technical information contained above are based on a NI 43-101 compliant technical report dated March 12, 2007 prepared for the Company by Wardrop Inc. which is filed under the Company´s profile on SEDAR at www.sedar.com. This report contains more detailed disclosure on the Thor Lake Project.
2007-2008 Work Program
Avalon commenced drill testing of the Lake Zone in August 2007, after receipt of a permit for exploration and drilling issued by the MacKenzie Land and Water Board. A $1.18 million work program of 16 holes (of which three were abandoned due to difficult conditions) totalling 2,551 m was completed by October 2007. The program focused on the area of the Lake Zone that is under land, south of Thor Lake. The results confirmed the presence of the mineralized zone and was sufficiently encouraging enough that the Company was able to raise additional capital to finance a much larger program in 2008.
The subsequent $5.4 million work program completed during 2008 for the Lake Zone deposit involved a total of 14,129 m of drilling in 69 holes. These were designed to test the northern part of the Lake Zone (covered by Thor Lake) and carry out additional definition drilling on the southern part of the zone. There were 13 holes drilled in a tight cluster in the central part of the deposit in order to recover at least 800 kg of mineralized rock for metallurgical testing.
The overall objective of the program was to define sufficient indicated and inferred resources on which to base a pre-feasibility level analysis of the project. Hole spacing averaged 100-150 m and it remains to be determined what spacing will be required to upgrade the resources to the measured resource level of confidence.
To date, assays have been received for 58 of these holes. These results are presently being used by Wardrop to produce an interim resource estimate of the Basal Zone, a sub-zone situated near the base of the mineralized sequence that is demonstrating good lateral continuity, consistent enrichment in the HREE and good thicknesses averaging in the order of 20 m. Assays for the 27 drill holes drilled in the summer of 2008 on the southern part of the Lake Zone are still awaited. Once these are received and compiled, an updated resource estimate will be prepared which will form the basis for the pre-feasibility study. Overall, the results received to date are viewed by management as very encouraging as most holes have intersected significant REE mineralization in the Basal Zone containing a high proportion of the more valuable HREE. Drilling operations were performed by Peak Drilling Ltd. of Courtenay B.C. under the supervision of J.C. Pedersen, P.Geo., Senior Geologist. The Company´s Vice-President, Exploration, Dr. William Mercer, P.Geo. provided overall direction on the project.
Quality Control
A rigorous QA/QC program was implemented for all of the program samples to ensure high quality data. Analytical standards were prepared from crushed rejects of historical Lake Zone drill core samples, then analysed at five separate laboratories to determine an average value. These standards were then routinely inserted into the sample batches to monitor analytical data. All drill core was split on site, sampled in 2 m intervals and shipped to Acme Laboratories ("Acme") facility in Yellowknife for sample preparation. Acme then shipped pulverized splits from all the samples to its laboratory in Vancouver, BC. Duplicates and other check samples were analysed initially for the 2007 program at Actlabs in Ancaster, Ontario and later at ALS Chemex Laboratories, Vancouver, BC.
All samples are being analysed at both laboratories by lithium metaborate/tetraborate fusion and dilute nitric acid digestion, followed by whole rock and 45 element multielement ICP analysis. Details of the factors used to calculate rare earth oxides are posted on the Company website along with complete analytical data.
Metallurgical work
The 2008 program also included detailed mineralogical studies and metallurgical testwork conducted at SGS Lakefield Research ("SGS") to design a process flowsheet for beneficiating the REE bearing minerals and to design a hydrometallurgical process for recovering the rare earth oxides from the mineral concentrate. This work began in May 2008 with a QEMSCAN mineralogical assessment which was followed by initiation of bench-scale flotation test work on the 800 kg bulk sample collected from drill core. The Company has retained the services of Mr. J. R. Goode, P.Eng., a consulting metallurgist with over 40 years of international experience, to provide oversight on this work. Very preliminary flotation study results reported by SGS are indicating recoveries to an initial bulk cleaner concentrate of about 85% of analysed REE, about 70% of niobium and tantalum, and just over 80% of the zirconium with a fivefold concentration of the main potentially economic elements. Further trials are being undertaken to upgrade this concentrate.
It is anticipated that the results of the metallurgical work will be available, early in 2009. This work, combined with resource estimates, preliminary mine engineering, marketing and environmental studies will provide all the data required for completion of a pre-feasibility study ("PFS") on the deposit in 2009. The contract for the PFS has not yet been awarded.
Corporate Social Responsibility & Environment
The Company has placed a high priority on its performance with respect to community, environment, health and safety at Thor Lake. The result is that amongst its employees on site, it has 3,000 person-days with just one lost-time accident, while its contractors had 1,300 person-days with no lost time accidents. Site inspections by government land use and WCB inspectors have generally produced positive reports and any issues raised were addressed immediately. The only significant concern requiring further effort is related to excessive rutting caused locally by the tractor used for drill moves. The problem is being studied and an action plan developed to ensure that in future programs such ground disturbance is reduced to acceptable levels.
In late August 2008, a program of environmental site remediation work was initiated to clean up waste material and debris left behind by previous operators on the site and has now been concluded. The cleanup work was carried out under a contract with the Deninu Kue First Nation of Fort Resolution, NWT, consistent with the Company´s policy of maximizing employment opportunities for local communities. To this end, the Company has initiated the development of training programs for local native people in co-operation with the NWT Mine Training Society. These programs will focus on surface diamond drilling and first aid, being two areas where there are chronic labour shortages in the NWT.
The Akaitcho Territory Interim Land Withdrawal ("ILW") did not affect the Company´s planned work program at Thor Lake in 2008, as the company already had the necessary land use permits in place. In addition, the ILW is not expected to have a material impact on the Company´s development plan for the duration of the ILW. For the duration of its work program, Avalon will continue to work with all of the aboriginal peoples of the area to maximize employment opportunities for local people and business opportunities for local service providers, as it continues to conduct its work programs in an environmentally sound and safe manner.
Fourteen individuals from local native communities were employed on the project at different times during the 2007-2008 work program. The Company also conducted nine community consultation meetings over the course of the year and six site visits by community members in accordance with its CSR policy. It also held three such meetings in the fall of 2008 including one with Chiefs and council of the Yellowknife´s Dene First Nation. This has resulted in growing support for the project from local aboriginal community leaders.
The company has received the requisite permits to commence a program of environmental baseline studies on the property, to be carried out by Jacques Whitford AXYS. This initial field program, carried out in September 2009, included studying both surface and ground waters, water chemistry in the lakes of the area, aquatic biology, terrane analysis and collecting meteorological data. This work will continue in 2009.
Avalon Rare Metals Inc. 43-101
Resource Est Feb09 Lake Zone All REE 0.2
Resource Est Feb09 Lake Zone other elements 0.2
Detailed Element Oxides Analyses
Oxide Conversions
Detailed assay composites May 11 09
DD location plan May 11 09
