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As part of its strategy of becoming a leading vertically integrated lithium producer, Avalon Advanced Materials (TSX: AVL) has announced the creation of a new joint venture with SCR-Sibelco NV.
Headquartered in Antwerp, Belgium, Sibelco is a global leader in material solutions. It mines, processes and sells specialty industrial minerals – particularly silica, clays, feldspathics and olivine – and is a leader in glass recycling.
As part of a binding term sheet signed Thursday, Sibelco purchased C$10 million worth of Avalon common shares, representing approximately 19.9% of Avalon’s equity stake, and was issued a secured convertible debenture in the principal amount of C$3 million.
Proceeds from the private placement will be used by Avalon to fund the acquisition of industrial land for a lithium-hydroxide processing facility in Thunder Bay, Ontario, and repayment of up to C$1.9 million of existing debt.
The companies are also forming a joint venture with respect to Avalon’s lithium projects, including Separation Rapids and Lilypad in northwestern Ontario. Sibelco will act as operator and has committed to invest €35 million ($38.3 million) into the joint venture.
Of this amount, €5 million is to be advanced concurrently with the contribution by Avalon of its interests in the lithium projects, with an additional €30 million to be advanced in tranches to fund the development of the projects and related infrastructure.
After total cash contributions of €35 million by Sibelco, each of the parties will make any further cash contributions on a pro-rata basis (with dilution to a non-contributing party’s interest). While the initial participating interests to be held by Sibelco and Avalon will be 60% and 40%, respectively, such participating interests may change to 65% and 35% should Avalon fail to meet its debenture obligations upon maturity.
“This strategic partnership represents a significant step forward in scaling our business towards full vertical integration of our lithium production,” Avalon CEO Scott Monteith said news release. “Sibelco’s investment is a major vote of confidence in our vision, resources and capabilities by a respected and established international operator—and now partner.”
“Our partnership with Avalon will focus both on the clean energy growth agenda and the technical glass and ceramics markets in which Sibelco has deep and time-tested expertise,” Hilmar Rode, Sibelco’s CEO, added.
Shares of Avalon Advanced Materials soared 20.8% by market close Thursday. The lithium developer has a market capitalization of C$60.3 million ($45.6m).
