Avalon stock surges on $63M investment, joint venture with Sibelco

Avalon Advanced Materials (TSX: AVL; US-OTC: AVLNF) is partnering with Antwerp-based SCR-Sibelco NV to advance its lithium exploration projects in Ontario and its plans to build a lithium-hydroxide processing facility.

News of the joint venture agreement sent its stock up 20.8% by market close Thursday to 14¢ per share. The lithium developer has a market capitalization of $60.3 million.

Sibelco is a global leader in material solutions, mining, processing and selling specialty industrial minerals  – particularly silica, clays, feldspathics and olivine. It’s also a leader in glass recycling.

“This strategic partnership represents a significant step forward in scaling our business towards full vertical integration of our lithium production,” said Scott Monteith, chief executive of Avalon, in a 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.”

As part of a binding term sheet signed Thursday, Sibelco purchased $10 million worth of Avalon common shares, representing about 19.9% of the company, and was issued a secured convertible debenture in the principal amount of $3 million.

Avalon will use proceeds from the private placement towards the acquisition of industrial land for a processing facility in Thunder Bay, and to repay up to $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 will invest €35 million (about $50.4 million) into the joint venture.

After total cash contributions of €35 million by Sibelco, each of the parties will provide funding on a pro-rata basis (with dilution to a non-contributing party’s interest). At the formation of  the joint venture, Sibelco will hold a 60% interest, but can increase its stake to 65% if Avalon fails to meet its debenture obligations upon maturity.

“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, said in the release.

Avalon’s Monteith assumed the role of interim CEO in May, taking over from longstanding chief executive Don Bubar on his retirement. The company also appointed Jim Jaques as chief administrative officer, and added Jan Holland to its board.