Financial viability in question I'd be curious to her you opinion on this:
https://www.theglobeandmail.com/business/article-avalon-liberals-lithium-plant/
Financial viability of proposed lithium processing plant feted by federal politicians in question
Canadian junior mining company Avalon Advanced Materials Inc. AVL-T hosted federal Industry Minister Franois-Philippe Champagne at a proposed lithium processing site in Northern Ontario on Thursday, and it hopes to get funding from Ottawa, even as the company’s financial future hangs in the balance.
Toronto-based Avalon says it intends to build Ontario’s “first domestic supply chain” that will link lithium deposits in the north to the expanding electric battery manufacturing base in the south.
But given the company’s financials, it’s not clear how it can raise the money to build its planned lithium refinery in Thunder Bay.
The capital cost estimate for the project is US$850-million. The company is currently holding only $741,381 in cash and recently disclosed that raising even small amounts of money won’t be easy.
“Given the continuation of weak investor interest and capital market conditions in the junior resource sector amongst other factors, there exists an uncertainty as to the company’s ability to raise additional funds on favourable terms,” the company wrote in a regulatory disclosure in July.
Avalon, whose shares trade for pennies on the Toronto Stock Exchange, and whose market value is roughly $62-million, had revenue of only $11,394 in its latest quarter.
The company’s financial position is so precarious that it recently issued a “going concern” warning over its ability to continue to operate.
The visit by Mr. Champagne to the site of Avalon’s proposed refinery raises questions about how closely federal politicians are considering the financial conditions of critical minerals companies before adding credibility to them by staging photo ops and inviting local media to publicize such events.
Mr. Champagne declined comment for this story.
When asked how it can raise more than three-quarters of a billion dollars for the lithium plant, given the company’s financial position, Zeeshan Syed, president of Avalon, said in an interview that he is optimistic that talks with various private sector partners could be fruitful, including possibly receiving funding from its existing joint venture partner Sibelco of Belgium, as well as from Finnish company Metso.
He also hopes Ontario’s provincial government could come through with funding, and said the company is in “deep discussions” with the federal government.
Mr. Syed says the company is targeting a start date of 2028 for the plant, and says it will create hundreds of jobs.
“We’re not in any way selling a fantasy,” he said.
Audrey Champoux, spokesperson with Innovation, Science and Economic Development Canada, wrote in an e-mail to The Globe and Mail that there is “no record” of a funding request from Avalon within the Strategic Innovation Fund.
Avalon is far from the only junior mining company with shaky financials to get a vote of confidence from high-level federal politicians in the form of a plant visit, and also funding.
Earlier this year, Australia’s Vital Metals Ltd. hostedPrime Minister Justin Trudeau at its 3,000-square-metre rare earths processing plant in Saskatoon, which at the time was in construction. The junior, which had planned to source rare earths from its Nechalacho mine in the Northwest Territories, has since revealed that its processing plant is not viable. It is halting construction of the plant and put its Canadian subsidiary into creditor protection. Ottawa provided $5-million in funding for the project.
Noront Resources Ltd., a junior mining company in Ontario’s much-vaunted Ring of Fire region, for years insisted that it intended to build a chromite processing plant in Sault Ste. Marie, Ont., and dangled the prospect of jobs for locals. But that plant was never built. The company at the time was in financial difficulties and eventually was acquired by Australia’s Wyloo Metals Pty Ltd.
Meanwhile, another junior, Electra Battery Metals Corp. ELBM-X, which attracted $10-million in funding from the Ontario and federal governments, and had intended to build the first cobalt processing plant in the province, halted its plans earlier this year amid major cost overruns. Electra’s shares over the past year have fallen by 85 per cent as it searches for a buyer.
The struggles of juniors also illustrate that while Canada has made strong strides in creating a battery-metals industry, it is far behind in building processing facilities for minerals such as lithium, nickel and cobalt that are used in the batteries.
Nemaska Lithium, which is 50 per cent owned by the Quebec government, has plans to eventually build a lithium refinery in the province.
Brazilian-owned Vale Canada Ltd. also has plans to build a battery nickel refinery in Quebec.