Can these companies open two NWT mines on top of each other?

East of Yellowknife, an unusual situation is developing. Two exploration companies are trying to start mines in almost exactly the same place, separated only by depth.

“It’s a scenario that I’ve never come across in the mining industry,” said Vital Metals boss Lisa Riley.

By virtue of an agreement signed in 2019, Vital Metals has the top bunk. The company has the rights to the first 150 metres below sea level at the Nechalacho site, home to increasingly important and valuable rare earths that help to power electronics, green tech and some military equipment.

Avalon Advanced Materials, in the bottom bunk, has the rights to everything below the 150-metre mark.

Seven years ago, Avalon sold the top bunk to a company associated with Vital “to keep the lights on,” in the words of Scott Monteith, who has been Avalon’s president for three years.

“You’ve just got to raise money any way you can sometimes, and they sold the upper zone because it didn’t have a lot of value to Avalon at the time,” Monteith said in an interview earlier this month.

For about six years, this wasn’t a big deal because the bottom bunk was effectively unoccupied. After the sale, Avalon switched focus to a lithium project in Ontario.

However, rare earths are an increasingly prized commodity and for the past half a year, Avalon’s attention to its share of Nechalacho has ramped up.

The company now says it has raised millions of dollars, is opening an office in Yellowknife and intends to turn Nechalacho “into a commercial operation” where construction could commence within two years.

Vital Metals, meanwhile, has already briefly operated a small-scale mine at Nechalacho and is deep into studying how to run a much larger open-pit operation.

Could both companies mine different levels of Nechalacho at the same time? Opinions differ.

‘It’s not possible’

“That’s a great question. It’s one that we wrestle with every day,” said Monteith when asked how Avalon intended to handle the presence of Vital.

“The nature of the agreement between Vital and Avalon keeps the door open for both parties to do their own work. Neither party can stand in each other’s way,” he said.

“One day, maybe we’ll be able to repatriate the two resources into one. That would be ideal. In the meantime, we have methods to access [the lower] zone without interfering with or disrupting Vital’s operation – and vice versa.”

What those methods are is not clear.

Asked if, for example, Avalon could presumably sink a shaft to reach its share of the deposit, Monteith replied: “I think the key word is presumably, I guess.”

In an email, he added that Avalon intended to “cooperatively cohabitate” the site.

Riley, reached by phone in South Africa, stressed: “Please do not make this big between us and Avalon, because it’s not big.”

However, she simultaneously set out a view of the agreement with Avalon that did not sound like Monteith’s interpretation.

“It’s not possible for them to both be mined at the same time, let me be perfectly clear with you,” she told Cabin Radio.

“That’s not possible. In the exploration stage, we might be able to come to arrangements. At the end of the day, are we both mining at the same time? No.”

Companies share regulatory permits

In the years when Avalon wasn’t on the scene, Vital began building its vision of Nechalacho. That work has endured turbulence.

The company, which is Australian-owned, removed its managing director and shut down its small-scale demonstration mine in a shift toward a much larger proposal.

More senior management changes took place, then Vital accepted heavily scrutinized investment from Chinese firm Shenghe, money that Vital said was urgently needed but which critics said opened the door for a rival power to exert some control over rare earths in Canada.

Vital placed a subsidiary tasked with opening a Saskatoon-based processing facility into bankruptcy, then agreed at the last minute to sell its rare earths stockpile from the demonstration mine to the Saskatchewan Research Council rather than to Shenghe.

The past 12 months had been smoother sailing by comparison, but now Avalon has reactivated its interest in the bottom bunk – and the two companies hold one shared set of regulatory permits for the site through a joint venture, meaning how one operates could have a direct bearing on the other.

“The key piece is the communication, respect and collaboration. Different people have different views of what that means,” said Riley.

“From where I sit, what that means is we need to have discussions with each other and with all of the involved communities to make sure everybody knows what’s going on at any given time.

“We’ve communicated that very clearly to Avalon. I suspect that everybody they speak to will communicate that very clearly to Avalon. And certainly the folks I have spoken to were very concerned that Avalon was putting out lots of press releases about what they were going to do in the Northwest Territories, and they hadn’t spoken to anybody, and so I think that generated some anxiety. I assume they will rectify that situation before they go out and do anything.”

Avalon said opening a Yellowknife office was part of its plan to increase local communication.

“We’ll hire a team locally to staff that office and provide boots on the ground,” said Burl Joseph, who described himself as a former Yellowknife resident who previously worked with the Tłı̨chǫ Investment Corporation.

“I’ll also be reaching out to the First Nations to make sure we are in compliance with our previous agreements, and also to refresh them. Nechalacho is right in the middle between Dettah and Łútsël K’é [so Avalon is] looking to engage with all of them and move forward with partners as needed,” Joseph said.

“We want to bring awareness to the project itself and start engaging with them to see what benefits we can bring, training opportunities, work opportunities, and engaging them with traditional land use, if there’s anything that they can provide insights into.”

Both companies launch studies

Avalon is embarking on a public relations offensive to sell its asset to a world craving new sources of rare earths that would help North America and Europe break free from Chinese dominance of the market.

Monteith said his company had been “busy in Washington and in Ottawa raising the awareness of the importance of onshoring rare earth and lithium mining and refining to get away from China’s grip.” In his view, the United States and Canada are both “extremely interested in the Nechalacho resource for national security reasons.”

He said Avalon’s Nechalacho project would be a joint venture featuring First Nations alongside “big mining, big processing, offtakers, government, private equity and Avalon” as shareholders. (Discussions about exactly which companies and governments might sign up are ongoing, he said.)

Both Avalon and Vital are now working on forms of feasibility study for Nechalacho – documents that underpin junior mining companies’ sales pitches to investors, governments and mining giants.

Avalon is also pitching the idea of setting up a small-scale refinery on the Nechalacho site itself.

Monteith said he wants to build the refinery to show off “an eco-friendly refining process” Avalon is developing, which the company ultimately hopes to incorporate into a larger facility in either Saskatchewan or Louisiana.

Riley doesn’t think a refinery at Nechalacho will come to pass.

“There will be 14,000 hoops of fire that they would have to jump through in order for that to happen,” she said, noting the current permits don’t allow for one.

Avalon said it will apply for the necessary permits.

“We’re closest to the starting line of any rare earth resource in North America, to begin mining,” said Monteith of Avalon’s proposed mine.

“Not only are we a proven resource with [an older] feasibility study that’s in place, we have many permits already in place, so we just have to fine-tune the permits left to fall into place. With the permits in place and the capital stack in place, we can start construction on the mine.”

“We are the incumbent at this point,” said Riley of Vital’s proposed mine.

“We have all the relationships, and we hope that Avalon will follow our lead and build up those relationships themselves.”