Avalon enters $15M deal for lithium processing plant

Avalon Advanced Materials (TSX: AVL; US-OTC: AVLNF) announced on Monday it has entered into a $15 million funding agreement with its long-time creditor Lind Global Fund II, held by New York-based institutional fund manager The Lind Partners.

The first drawdown will be for $2.7 million, and is expected to close within the next two weeks, the Canadian lithium developer said, noting that this initial fund will be used to accelerate work at its planned lithium processing facility located in Thunder Bay, Ont.

“We are very pleased to continue our long-term relationship with Avalon, dating back to our first investment together in 2017, by making this new investment to support Avalon’s processing facility in Thunder Bay,” Phillip Valliere, managing director at the Lind Partners, said.

“We are optimistic of their Thunder Bay strategy and believe that Avalon has a unique opportunity to become a significant player in the lithium supply chain for EV battery manufacturers in Ontario.”

The funding announcement comes despite the lithium space facing headwinds due to lithium carbonate, a precursor to lithium hydroxide used in electric vehicle batteries, losing much of its value since last year. However, since the beginning of March, prices have risen slightly and on Thursday were at 115,909 yuan (US$16,103) per tonne, the highest level since December, according to Trading Economics. Analysts recently assessed that lithium prices have hit bottom and are poised to rebound by July.  

Last July, Avalon announced it is teaming up with Finnish mining tech group Metso to build what would be the first battery-grade lithium facility in the province. Under the partnership, the company would be able to license Metso’s technologies to produce lithium hydroxide cathode materials for the global EV market.

A month prior to the announcement, Avalon finalized the purchase of a 1.5-sq.-km industrial property with unique access to a deep-water port, rail, road and other critical infrastructure to house the processing facility.

The entire $15 million financing is in the form of a convertible security. The security in the first drawdown will have a two-year term and accrue a simple interest rate obligation of 10% per annum, which is prepaid and attributed to the face value upon issuance, resulting in a face value of $3.3 million.

Lind will be entitled to convert the face value amount over a 24-month period at a conversion price equal to 85% of the five-day trailing volume weighted average price of Avalon’s common shares prior to the date of conversion.

Shares of Avalon Advanced Materials traded at 8¢ on Monday morning, touching the floor of its 52-week range of 8¢ and 17¢. The company’s market capitalization was $48 million.