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.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
