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Former Algoma Steel owners sign deal to help build lithium refinery in Thunder Bay

Essar Group and Avalon Advanced Materials team up with aim of having $500-million processing plant in operation by 2025 to serve electric vehicle market
(Avalon Advanced Materials photo)

Avalon Advanced Materials has found a global financing partner from India to help build a $500-million lithium refinery in Thunder Bay.

After its first development partner backed out, Avalon, a Toronto-based junior miner, announced April 4 that it's signed a binding letter of intent with RenJoules International, a subsidiary of the Essar Group.

Essar will become a strategic partner and a co-developer to financially back Avalon's plans to construct a regional processing facility to handle the concentrate from its Kenora-area deposit and other lithium exploration companies in northwestern Ontario.

In a news release, Avalon said it expects construction to begin this year at a yet-to-be-named site in Thunder Bay, which the company said it is finalizing. Tentatively, the plant will go into operation in 2025.

Plans for a plant were first announced in late 2020. 

The Mumbai-based Essar Group is best known in Northern Ontario for being the one-time owners of Algoma Steel in Sault Ste. Marie. It's a diversified privately owned international entity with interests in energy, logistics, metals and mining and financing.

Based on anticipated demand for lithium and the growing electric vehicle market, Avalon expects the initial production capacity for the refinery to be 20,000 tonnes per year of processed lithium hydroxide and/or lithium carbonate.

Lithium is predominately used in the manufacture of lithium-ion batteries used in electric vehicles (EV).

Avalon said in the release that it expects to tap into various government funding programs to source funds to build the refinery and Indigenous businesses in Northern Ontario. It's an opportunity for the provincial government to make good on the commitments in its recently announced Critical Minerals Strategy.

This proposed refinery will operate under a separate business line called Avalon Lithium Inc. of which Essar will become a co-owner.

It will be set up to act as a toll processing operation, not only handling lithium concentrates from Avalon's deposit at Separation Rapids, north of Kenora, but other "aspiring" potential lithium producers in northwestern Ontario.

Avalon did not mention any pending agreements with other junior miners in the region.

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The company said the next steps include finalizing initial commercial terms and completing the final feasibility studies for both the Thunder Bay refinery and lithium mineral concentrate production at the Separation Rapids site that will provide the initial feed for the refinery until other producers get on board.

In a statement, Avalon president Don Bubar said this is only the first phase of where Northern Ontario can go to be a domestic source of much-needed material for the next generation of technologies.

"While EV manufacturing and lithium battery materials production can be the initial catalyst for starting critical minerals supply chains in the North, it is just the beginning where innovation of new products and new efficient processing technologies for other critical minerals such as tantalum, cesium, and rare earths, can inspire future growth into other areas of advanced manufacturing including aerospace technology."

Essar Power CEO Kush Singh said this partnership fits its global plans to be part of the transition to green energy technologies.

"We truly believe that green energy is the future. This initiative of setting up a lithium refinery is a core part of Essar's global strategy of investments in the energy transition towards decarbonization with a prime focus on Green Hydrogen and Storage. Lithium is a foundational critical mineral for the battery supply chain and with the Ontario government's stellar vision through its Critical Mineral Strategy, we are confident that this is the right location and time for our strategic partnership with Avalon and other stakeholders."

In the release, Avalon said this operation will create economic development opportunities for First Nations to take advantage of lithium resources in their traditional territories to produce lithium mineral concentrates for purchase by Avalon Lithium.

Avalon thanked the Ontario division of Invest in Canada for introducing them to Essar last year.