Avalon raises $40M for Nechalacho

VANCOUVER — Canada’s most advanced rare earth element project now has enough funding to move through a feasibility study and beyond, as Avalon Rare Metals (AVL-T) secured almost $40 million through a financing and the exercise of warrants.

In the financing Avalon sold 9.24 million units at $3.25 apiece, for proceeds of $30 million. Each unit comprised a share and half a warrant exercisable at $3.60 for a year.

A week later, the company announced receipt of another $9.6 million from the exercise of warrants.

During September, investors exercised some 3.84 million warrants to take advantage of a time-limited price amendment program: during the month investors were able to exercise $3 warrants at $2.51. There are now fewer than 160,000 warrants from Avalon’s 2009 financing that remain unexercised.

Avalon’s president and CEO Don Bubar was pleased that many warrant holders bought into the amendment program. “This reflects the high degree of confidence our shareholders have in the development potential of the Nechalacho heavy rare earths project,” he said in a press release.

“The $43 million in cash resources now in the treasury provides Avalon with the funds to complete the bankable feasibility study by 2012, and also allows the company to make the longer-range financial commitments necessary to complete this work on schedule.”

The financing and the warrant exercise program have left Avalon with $43 million in the bank, all of which the company will direct towards Nechalacho.

Nechalacho is the largest and most advanced rare earth metals project in Canada. The project is near Thor Lake in the Northwest Territories. In early September, Avalon updated the project’s resource estimate to incorporate results from the 2010 winter definition drilling program.

The Nechalacho resource now stands at 20.45 million indicated tonnes grading 1.75% total rare earth oxides (TREOs), of which 23% are heavy rare earth oxides, the less common and more valuable subset of the rare earth group. Inferred resources add 182.6 million tonnes averaging 1.4% TREOs.

Avalon’s share price has performed well since August, when the company’s shares were between $2.40 and $2.80. Worth roughly $1 more, Avalon closed recently at $3.59. The company has 92 million shares outstanding, 103 million fully diluted.