Avalon Upgrades Thor Lake

Avalon Rare Metals (AVL-T, AVARF-O) has outlined enough resources to warrant going ahead with a prefeasibility study on its Thor Lake rare metals project, 100 km southeast of Yellowknife, N. W. T.

Avalon has been drilling to upgrade inferred resources at the high-grade Basal zone to the indicated category. It has converted a total of 4.4 million tonnes grading 1.97% total rare earth oxides (TREO), with 25.4% of the TREO consisting of heavy rare earth oxides (HREO) using a cutoff grade of 1.6% TREO.

This new zone of indicated resources adds to a previously defined 2.2 million indicated tonnes grading 2.14% TREO (including 20% HREO) in the central part of the Basal zone, announced in February.

Though it was mostly infill drilling, the company also tested a few new areas and was able to increase inferred resources slightly. Inferred resources now stand at 64.2 million tonnes grading 1.96% TREO (including 16.8% HREO) from the Upper and Basal zones, which are close together, up from 61 million tonnes.

Avalon president Don Bubar says that although the company will continue infill drilling to upgrade the resource, the next big step will be completing the prefeasibility study.

“The prefeasibility study needs to be based on indicated resources,” Bubar says. “We’ve got enough outlined now to support moving forward, and we’ve got every reason to believe that we’ll find more as we do more infill drilling.”

Reclassifying resources from the inferred category to the indicated requires the company to tighten up the drill-hole spacing to 50 metres. Right now, most drilling has been spaced at 100-150 metres. Avalon will keep drilling through September.

The company is spending about $4 million this year — about $2 million on drilling, $1 million on metallurgical tests and $1 million on the prefeasibility study. The completion goal for that has been extended from the fourth quarter of 2009 to March 2010.

Bubar says the company is also making inroads on the community relations side of things.

Management had carried out several community meetings including attending the Dene National Assembly in Lutsel K’e, where the company was a corporate sponsor.

“It’s often pointed out to us that it’s a risk factor, so we want to demonstrate to people that we are taking concrete steps to mitigate that risk,” Bubar says.

He adds that the company is well financed and can complete the feasibility study without raising more money, though he notes that some investment bankers have shown interest in Avalon.

“We’ll be doing some listening,” Bubar says.

The company has also raised $17.5 million in a bought-deal financing to continue with a prefeasibility study at Thor Lake. A syndicate of underwriters led by CIBC, bought a combination of special warrants and flow-through special warrants. Special warrants were issued at $2.30 apiece, while the flow-through special warrants went for $3 apiece. The financing closed in September.

In the boardroom, former National Chief of the Assembly of First Nations Phil Fontaine has become a director. Bubar and Fontaine had worked together to develop and sign a memorandum of understanding in 2008 between the Assembly of First Nations and the Prospectors and Developers Association of Canada, where Bubar has served as chair of the PDAC’s aboriginal affairs committee since 2004.

Since retiring as AFN chief in July, Fontaine has also become a special adviser to the Royal Bank of Canada.