Investors
Over the past 12 months, despite a challenging global economic environment in the second half of 2008, Avalon Ventures Ltd. (the "Company" or "Avalon") has continued to make solid progress towards its goal of becoming a profitable producer of rare metals and minerals. With the benefit of $16 million in new financing secured in November, 2007, the Company has successfully advanced all four of its priority rare metals and minerals projects with the Thor Lake project continuing to be the Company's principal focus. Initial results from a major drilling program completed in 2008 on this project confirmed the large size and exceptional enrichment of the Lake Zone Rare Earth Element ("REE") deposit in the valuable heavy rare earth elements ("HREE"), with a new resource estimate expected before year-end. During the year, the Company achieved most of the strategic goals it set for itself twelve months ago. In particular, we:
Demand for the REE generally (and the HREE in particular) continues to grow steadily due to their critical application in a variety of new technologies related to energy efficiency and a cleaner environment. This demand remains strong even in the face of a global recession, with an increasingly sustainability-focused society insisting on evermore efficient use of energy and reduced reliance on fossil fuels. Governments around the world are reacting with new public policy initiatives to stimulate the introduction of new renewable energy technology such as wind and solar, as well as more fuel-efficient hybrid and electric automobiles. As Avalon shareholders are now well aware, many of these new energy efficiency technologies are enabled through the use of rare metals, especially the REE. Yet supply remains constrained with China still being the source of over 95% of the world's current production of REE. With China's internal demand for REE now growing more rapidly than its primary production, the Chinese government is beginning to impose tariffs and export quotas to keep more unprocessed REE production in the country for its own industrial consumption. This is creating the potential for future international supply shortages, underlining the need for new producers to emerge to meet global demand, forecast to grow at 10-15% year-over-year for at least the next five years. The Company's Lake Zone deposit is proving to be one of the largest and highest quality undeveloped REE resources in the world, and is already attracting growing interest from major international consumers. The Company's Lake Zone deposit is also attracting the attention of institutional investors who are becoming more aware about the critical importance of REE to energy efficiency technologies and the existing supply constraints. Avalon is now being recognized as one of the few public companies, and the only TSX-listed company, offering diversified exposure to the rare metals as a group and the REE in particular. This has translated into a growing following amongst institutional investors in North America and Europe and a strong, supportive shareholder base being cultivated by a proactive investor relations program. We are building on this base with our demonstrated commitment to CSR practices and the many clean technology applications of the rare metals, all of which give the Company appeal to a broader investor audience. Avalon is uniquely positioned in this regard to market itself as a "green" mineral development company and attract some of the growing numbers of "socially-responsible" investment funds. Accordingly, we have initiated a re-branding process to emphasize this theme in our marketing programs along with our rare metals focus, and plan to unveil a new corporate logo early in 2009. While investor interest remained strong through the year, this did not make the Company's share price immune to the effects of the global stock market meltdown that began in September, 2008. Fortunately, a healthy treasury from the 2007 financing and strong fundamentals for the rare metals made the effects of the meltdown much less devastating for Avalon than they have been for many of our industry peers who now find themselves with depleted treasuries and unable to finance at any price. Avalon remains able to raise capital when necessary as demonstrated by the $1.5 million flow-through private placement announced on November 27, 2008. This small financing will provide the Company with additional funding needed for continued drilling on its Thor Lake project in 2009 while maintaining a strong working capital position to sustain the Company through the current economic downturn. In deciding to proceed with this offering, management and the Board considered the dilutive effects of offering treasury shares at depressed prices, and accordingly elected to limit the size of the offering to only the amount needed immediately for the planned Thor Lake winter work program. With the prospect of prolonged depressed capital markets, management concluded it to be prudent to conserve working capital and take advantage of the availability of flow-through funding in 2008, which may not be as readily available in 2009. Furthermore, given the uncertain economic times we are presently enduring, the Company will make capital preservation a priority and accordingly we will reduce overhead expenditures where practical and put non-essential project work programs on hold. One current example, consistent with our environmental objectives, was the decision not to produce a colour annual report for mailing to the shareholders this year with the AGM materials. Maximizing the potential value of the Thor Lake REE project for our shareholders remains the Company's top priority. The $6.0 million drilling program carried out in 2008 has advanced us toward that goal, and with an additional $3.0 million expenditure planned in 2009, we expect to further delineate REE resources in the Lake Zone deposit, finish defining a metallurgical process flowsheet and mining plan, continue environmental baseline studies and complete a pre-feasibility study on this exceptional deposit, an essential first step to demonstrating this value to investors. We also remain committed to working with our neighbours to maximize benefits for local community members through partnerships, training programs and direct employment opportunities. While the Thor Lake project is the priority, work will continue on our other rare metals projects, albeit at reduced levels. On the Separation Rapids project, we will continue an active marketing program for our lithium minerals product and attempt to take advantage of the growing demand for lithium both in glass and in rechargeable batteries, with a view toward eventually attracting development capital for the project. On the Warren Township calcium feldspar project, we will conclude the permitting process in 2009, so that we will be in a position to move development forward quickly if and when market conditions improve. A desktop study on the East Kemptville Tin-Indium deposit completed in 2008 confirmed the potential for renewed production of tin plus copper, zinc and indium at this historical minesite and a more thorough (NI 43-101-compliant) Preliminary Economic Analysis will be completed on this project in 2009 to demonstrate positive economics of the project and attract new financing. Recently, Mr. Dale Corman informed the Board of his intention to retire from service as a Director in 2009 and accordingly, Mr. Corman will not be standing for re-election at the 2009 Annual General Meeting of shareholders. Mr. Corman joined the Board when I did in 1995 and has been a reliable and valued source of strategic advice both to management and the Board for all of the past 13 years. I am most grateful for his assistance in 2004 in identifying new investors that helped re-finance the Company at a time when sources of capital were scarce. On behalf of the Board, I would like to extend sincere thanks to Mr. Corman for his important contribution to the growth achieved by the Company to date. Finally, I would like to thank you, our loyal shareholders, for your continuing support through a challenging economic period, as we continue to advance our Thor Lake project and position ourselves to take full advantage of the growing demand for rare metals when the inevitable recovery of global commodities markets gets underway. On behalf of the Board,
Donald S. Bubar, December 12, 2008 |
