Avalon Completes Collaborative Development Agreement on Nechalacho Rare Earth Elements Project, Yellowknife, NWT

25 June 2019

Toronto, Ontario--(Newsfile Corp. - June 24, 2019) - Avalon Advanced Materials Inc. (TSX: AVL) (OTCQB: AVLNF) ("Avalon") is pleased to announce that further to its news release dated January 30, 2019, it has entered into a definitive agreement (the "Agreement") with Cheetah Resources Pty Ltd. ("Cheetah") to collaborate in the development of the rare earth resources on its mining leases collectively comprising the Nechalacho Project at Thor Lake near Yellowknife, NWT, Canada (the "Property").

Under the Agreement, Cheetah will acquire ownership of the near-surface mineral resources on the Property above a depth of 150 metres above sea level (approximately 100m below surface), principally the T-Zone and Tardiff Zones, and technical information related thereto, for a total cash consideration of C$5.0 million. Avalon will retain ownership of the deeper resources in the Basal Zone that were the subject of its 2013 Feasibility Study. The first $200,000 was provided as a deposit following the signing of the terms sheet in January. The balance of the cash consideration will be paid incrementally over a four-month period from the date of the Agreement, with the next payment of $1.5 million being due on June 30, 2019.

Avalon's President and CEO Don Bubar commented, "We are very pleased to have reached agreement with Cheetah on this innovative collaboration model, which allows for relatively rapid initial development at a small pilot scale, with low capital requirements and minimal environment impacts. Once established as a reliable long-term source of the magnet rare earths, the business can grow to establish a new North American supply chain of these critical materials. With China now controlling at least 80% of global rare earth supply, and threatening to restrict exports, new domestic supply chains to serve the North American market must be created to reduce reliance on supplies of rare earths from China."

Cheetah is focused on the small-scale development of rare earth resources enriched in the "magnet rare earths," neodymium and praseodymium ("Nd-Pr"), presently in short supply and high demand for clean technology applications, notably electric vehicles. Cheetah is satisfied that the near-surface resources in the T-Zone, enriched in the Nd-Pr mineral bastnaesite, are well-suited for very low cost, pilot-scale development utilizing ore-sorting technology. Once in operation, there will be the opportunity to evaluate by-product opportunities from the T-Zone, notably lithium, and the future growth potential from other near-surface, bastnaesite-rich resources contained in the Tardiff Zones.

Cheetah is presently planning to proceed with a work program on the Property this summer, managed by Avalon, to confirm rare earth resources in the T-Zone; collect a bulk sample for further metallurgical process testwork; and complete additional environmental studies needed for project permitting to supplement and validate Avalon's extensive previous environmental baseline work. Discussions will also be initiated with Indigenous partners towards creating new business relationships for Cheetah that will maximize economic opportunities for local Indigenous communities.

Under the terms of the Agreement, Avalon retains ownership of the mineral resources below a depth of 150 metres above sea level and will continue to have access to the Property for exploration, development and mining purposes. Cheetah will have use of Avalon's existing infrastructure located on the Property for development. The Agreement also grants Cheetah the option to purchase Avalon's option in the third party-owned 2% net smelter royalty over certain mining leases of the Property for a payment of $1.5 million provided that, upon exercising the option, Cheetah extinguishes this royalty. Avalon has also agreed to waive the Avalon-owned 3% net smelter royalty (over the same mining leases), for the first five years of commercial production and to grant Cheetah the option to pay Avalon $2.0 million within eight years of the transaction closing to extend the waiver of Avalon's royalty in perpetuity. Avalon will be actively involved in Cheetah's work programs by providing management services to Cheetah specifically related to the development of the T-Zone and Tardiff Zones, including geological, environmental and Indigenous community relations work. The transaction is expected to close within 120 days from the signing of the Agreement, subject to a number of conditions including completion of due diligence.