Mining investors know gold like the back of their hands. Other precious and basic metals, like platinum and copper, are well-known commodities as well. But when it comes to “critical minerals,” many investors misunderstand the term… and overlook the potential.
The reason some non-traditional commodities are called critical minerals is because they’re essential to the manufacturing of certain products. Unlike mining for gold or copper, the opportunity in critical mineral mining is more akin to a technology business where you are participating in the supply chain for producing products, especially those designed for high-tech applications.
That’s why the list of critical minerals includes metals used in technology like smartphones and batteries, but also those used in the products of the impending future, including electric vehicles and renewable energy production. Some are needed now, and some have demand forecasts showing they’ll be needed sooner rather than later, but all of that technology still relies on minerals mined from the ground.
Investing in critical minerals, therefore, is the definition of a long-term investment. Mining companies with holdings in lithium, rare earths, and other critical minerals can often feel like they’re in manufacturing more than mining. These minerals are needed for products with their own demand forecasts, and one of the smartest ways to grow that business over time is by increasing your offerings and the size of the markets that you can serve with your products.
Perhaps no one understands that better than Don Bubar, President and CEO of Avalon Advanced Materials Inc. (TSX:AVL, OTC:AVLNF, Forum). Mining investors might already be familiar with Avalon as a well-known mineral development company specializing in sustainably produced materials for clean technology.
(Image via Avalon Advanced Materials)
With a 25-year history in Canada and holdings in lithium, tin, cesium and rare earth elements, Avalon is already one of THE names in critical minerals. The Company is a pioneer, with Bubar having seen the emerging trend for clean technology emerging more than ten years ago, along with seeing the relevance of environmental and social performance for accessing markets. While other mining investors scoffed at the notion, Avalon was making national news for working with local First Nations on respective projects.
Today that kind of thinking is par for the course, but Bubar remembers getting a lot of heat for those decisions back in the day. In a recent interview with Stockhouse Editorial to discuss Avalon’s critical minerals holdings, the Company’s President and CEO highlighted the forward-thinking strategies and how investors have started to come around.
“We took the position of looking at clean technology and subscribing to the principles of environmental, social, and corporate governance very early on. Some thought that I saw things a bit too early! I would get investors asking why we’re wasting money on sustainability, but now they’re getting it: the importance of First Nations being active participants in the business world, and the relevance of ESG performance for accessing clean technology markets. People are used to the gold mining business of large-scale developments impacting the environment. But with most of these minerals, we can start at a small scale, with a smaller level of capital requirements, and then build it up from there.”
The other thing Bubar and the Avalon team quickly figured out is how to play the critical minerals market correctly. There are many emerging critical minerals and commodities with individual predicted demand curves, and technology can change on a dime. In many cases, a new technological innovation can create demand that did not exist before. The Company’s strategy, therefore, was to accumulate a basket of assets that gives it a broad range of exposure, putting it in position to react quickly when new demand arises.
Right now, Avalon is seeing that demand rising from the lithium and cesium markets. With lithium, which was the Company’s first foray into critical minerals 23 years ago, the strengthening market is rewarding the Company’s portfolio and patience. Batteries saw an increased demand for lithium which has recently resurfaced as electric vehicle production has picked up, and new opportunities in glass and ceramics production have further opened up the lithium market.
(Image via Avalon Advanced Materials)
As interest in lithium has picked up, so has interest in Avalon’s lithium projects. The first is the 100% owned Separation Rapids Lithium Project just outside of Kenora, Ontario, host to a “complex-type” lithium-cesium-tantalum pegmatite deposit with a rare, high purity lithium mineral petalite. The 6,000-acre property has already seen Preliminary Economic Assessments for both a simplified business model focused on production of lithium mineral concentrates for glass and ceramics and a more complex study focused on production of lithium for a lithium hydroxide battery product. In both cases, the underlying economics were already sound, and the recently increased demand for lithium has only served to elevate them.
The other main lithium project is also historic, the Lilypad Cesium Property first staked by the Company between 1999-2000 near Fort Hope, Ontario. After confirming economically significant cesium, lithium, and tantalum mineralization, the project sat quiet until renewed interest in the underlying commodities, particularly cesium, created an opportunity to re-activate it.
Here, Avalon’s diverse basket of critical minerals shows its worth. The renewed rise of lithium has been expected by many, but heightened interest in cesium is relatively new. The rare metal has seen declining production just as demand has picked up for high technology products that utilize cesium, including atomic clocks, GPS, high density alkaline batteries, and coatings for solar cells.
In addition to the Company’s plans to conduct sampling programs at both lithium projects on the road to pre-feasibility and feasibility studies, Avalon has impressive prospects in many other critical minerals. The Company’s Nechalacho Rare Earths Project in the Northwest Territories has potential for heavy rare earths, and interest in the minerals already resulted in a partial sell-off of the property in 2019. Additionally, the East Kemptville Tin Project in Nova Scotia was a past-producing tin mine that closed in 1992 due to low prices but still hosts large stockpiles of tin mineralization that can potentially be processed economically, if tin prices stay strong.
(Image via Avalon Advanced Materials)
As we highlighted earlier, investments in critical minerals are as much tech-based as they are mineral-based. One of Avalon’s portfolio strengths has been to assess not just the underlying minerals, but new economically and environmentally sustainable ways to extract them, including in the use of innovative technology. In addition to the East Kemptville Project potentially implementing sensor-based ore-sorting for sifting through low grade stockpiles, new technology is driving Avalon to evaluate an unseen opportunity in many closed mine sites.
The opportunity looks at historical mining operations which produced one commodity in bulk and largely discarded other minerals, including some critical minerals, as waste. Most are still leftover in tailings or stockpiles and often results in acid mine drainage that can significantly harm the environment, and Avalon has zoned in on an innovative extraction technology that can recover rare earths and other metals from acid mine drainage, while remediating long-term environmental liabilities on the site. For the markets and local communities alike, the proposed recovery would be a win-win, and a demonstration facility is being planned.
(Image via Avalon Advanced Materials)
It’s the entire portfolio of holdings and technology that has made Avalon THE name to know in critical minerals. Bubar might have been early to the game, but he has seen interest in the Company’s strategy continuously increase as the market and investors alike have become more aware of the impending necessity of their work. Coming off the potential tail end of the COVID-19 pandemic, that understanding has only been heightened.
Mining experts and government officials especially have keyed into the importance of securing local supplies of critical minerals. In his interview with Stockhouse Editorial, Bubar pointed out that most critical minerals supplies are still controlled by China, and the increasing instability in trade between the US and China has motivated end-users to begin to look elsewhere.
“Awareness around the importance of these critical minerals supply chains is going up all the time, and that’s opening up more doors for us to take advantage. And the other element is growing tensions between China and the West and the realization that most of these critical minerals supply chains are controlled by China. Now that the Canadian government has agreed with the US government to cooperate on developing these minerals, that door is opening even wider. Clean technology needs these minerals, and we have them all on the ground in parts of Canada. Finally, they’re starting to understand and ask, what do we have to do to help get them started?”
It’s the kind of imminent mining market you can only be ready for with proper preparation and exposure to a wide range of commodities. Even outside of mining, investors are all-too familiar with the need for companies to have the ability to pivot and change as the need arises, and Avalon Advanced Materials has long been spreading its wings across the entire critical minerals market. The Company’s focus on critical minerals for clean technology sourced in an environmentally and locally sustainable way may have seemed farfetched in the past. Today, it is recognized as one of the best long-term investment strategies in mining, and it’s only just starting to pay off.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
