On June 14, 2023, Avalon Advanced Materials Inc. and SCR-Sibelco NV entered into a binding joint venture term sheet and completed a concurrent non-brokered private placement.
Private Placement
Pursuant to the terms of the private placement, Sibelco purchased: (i) 109,692,764 common shares for gross proceeds of $10 million which resulted in Sibelco owning 19.9% of the issued and outstanding common shares of Avalon; and (ii) a $3 million secured convertible note bearing interest at 7.115% per annum with principal and interest payable on maturity, being two years from the date of the convertible note. To the extent not repaid at maturity by Avalon, Sibelco will have the right to convert the outstanding principal amount of the convertible note and all accrued and unpaid interest thereon into either additional common shares of Avalon or an additional 5% interest in the joint venture corporation, as more particularly described below.
Avalon also granted to Sibelco, subject to certain conditions, the right to nominate up to two members to the board of directors of Avalon and a pre-emptive right to participate in future offerings of securities of Avalon.
The proceeds from the private placement are expected to be used to fund the acquisition of industrial land for a lithium-hydroxide processing facility in Thunder Bay, Ontario, repayment of up to $1.9 million of existing debt, and for working capital and general corporate purposes.
Joint Venture
Avalon and Sibelco agreed to establish a joint venture with respect to Avalon’s lithium projects, including Separation Rapids and Lilypad in northwestern, Ontario. Sibelco will act as operator of the joint venture and has committed to invest €35 million, with an initial €5 million to be advanced on or prior to the execution of a definitive joint venture agreement. The additional €30 million is to be advanced in tranches upon the reaching of certain milestones and to be spent exclusively on the development of the joint venture mineral projects and the setup of mining and processing operations of the joint venture. After total cash contributions of €35 million by Sibelco, each of the parties will make 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 on the formation date of the joint venture by Sibelco and Avalon will be 60% and 40%, respectively, if Sibelco converts the convertible note issued pursuant to the private placement into common shares in the joint venture company, such participating interests will change to 65% and 35%, respectively.
Cassels is acting for Avalon.