AVALON
ADVANCED MATERIALS

Avalon Advanced Materials Inc.

Management's Discussion and Analysis of Financial Statements for the year ended August 31, 2024

This Management's Discussion and Analysis ("MDA") of Avalon Advanced Materials Inc. (the "Company" or "Avalon") is an analysis of the Company's financial results for the year ended August 31, 2024 (the "Fiscal Year" or "Fiscal 2024"). The following information should be read in conjunction with the accompanying audited consolidated financial statements and the related notes thereto. This MDA is prepared as of November 28, 2024.

Land Acknowledgement

Avalon Advanced Materials Inc. acknowledges that our work takes place within the ancestral and traditional territories of First Nations and Métis people. We respect Indigenous rights and are committed to deepening our existing relationships while forging new and lasting ties which will ensure we and future generations benefit from the positive social and economic opportunities related to our operations.

Nature of Business and Overall Performance

Avalon is a Canadian critical mineral development and exploration company that is seeking to vertically integrate Ontario's lithium supply chain in order to serve the growing electric vehicle ("EV") battery market and other vital industries dependent on critical minerals. Shares of Avalon trade on the Toronto Stock Exchange (TSX: AVL), the OTCQB® Venture Market (OTCQB: AVLNF) in the United States and the Frankfurt Stock Exchange in Germany.

In May 2023, the Company commenced a fundamental transformation in its mission and corporate strategy. The Company's management team is deeply focused on commercializing the mineral assets that Avalon has acquired over the past two decades. In 2023 Avalon forged a joint venture with Belgium-based SCR-Sibelco NV ("Sibelco"), a global leader in materials solutions, to develop the Company's flagship lithium deposit at the Separation Rapids Lithium Project ("Separation Rapids"). A strategic partnership was also signed with Metso Corp. of Finland, a market leader in sustainable lithium processing. In addition, in June 2023, the Company acquired a 377-acre industrial property on Strathcona Avenue in Thunder Bay, Ontario, Canada that is supplied by hydro power, gas and water, and is accessible by road, rail and water via a deep-water port. As described below, Avalon intends to develop the Strathcona property into a full-service lithium conversion and processing facility.

These developments are expected to be transformative to Avalon's corporate profile and demonstrate the Company's continued evolution from largely a holding entity of undeveloped mineral deposits into a potential commercial producer and advanced manufacturer. These milestones mark a new chapter in the Company's evolution.

The ultimate objective is for Avalon to develop end-to-end supply chains for Canadian critical minerals, including lithium, zirconium and rare earth minerals. Avalon's immediate strategic focus is the development of the Ontario midstream lithium processing solution envisioned for Thunder Bay, Ontario, a strategy that will rely on lithium ore feedstocks from third-party producers through off-take agreements and potentially assets in which it holds stakes including Separation Rapids. It is a strategy that is intended to create value for Avalon shareholders, while simultaneously creating a more

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favourable investment climate for the commercialization of other regional deposits, which in turn should generate ongoing, incremental processing revenues for Avalon via new off-take agreements. Generating positive cash flow is essential to Avalon's mid- and long-term vision. In order to achieve these targets, Avalon may engage in productive commercial activities to secure the resources necessary for vertical integration and deliver on the promise of its assets. These off-take agreements may provide Avalon trading opportunities to generate trading commissions and or trading revenue until such time these supplies of feedstock are used in Avalon's lithium processing facility.

The Company has embraced the principles of sustainability as core to its business operations and has made a strong commitment toward implementing corporate social responsibility ("CSR") best practices. In December, 2024 the Company intends to release its thirteenth annual comprehensive Sustainability Report (the "2024 Sustainability Report") and in February 2021 secured a top 5% ESG Risk rating among our peer companies from Sustainalytics. The Company was also featured in the Benchmark Minerals' inaugural global lithium ESG rankings, scoring in the top 5% worldwide.

Strategic Partnership with SCR-Sibelco NV

During the quarter ended August 31, 2023, the Company entered into a binding term sheet to create a new joint venture with SCR-Sibelco NV ("Sibelco"), a global leader in materials solutions. Avalon issued to Sibelco, on a non-brokered private placement basis, (i) 109,692,764 common shares of Avalon ("Common Shares") for aggregate proceeds of $10,000,000, (ii) 1,793,722 Common Shares for aggregate proceeds of $197,309.42 in a subsequent "top-up" financing which resulted in Sibelco owning 19.9% of the issued and outstanding Common Shares of Avalon after the top-up financing, and (iii) a secured convertible debenture in the principal amount of $3,000,000 (the "2023 Debenture") (collectively, the "Private Placement"). During the Fiscal 2024, Avalon and Sibelco closed the joint venture transaction by transferring its Separation Rapids Lithium Project ("Separation Rapids") and Lilypad Cesium-Tantalum Project ("Lilypad") into a new joint venture company, Separation Rapids Ltd. ("SRL").

Overview of Transactions

Strategic Financing

Pursuant to the terms of the Private Placement, Sibelco (i) purchased 109,692,764 Common Shares at a price of approximately $0.091164 per Common Share (the "Per Share Price") for gross proceeds of $10,000,000; (ii) purchased 1,793,722 Common Shares for aggregate proceeds of $197,309.42 in a subsequent "top-up" financing which resulted in Sibelco owning approximately 19.9% of the issued and outstanding Common Shares of Avalon after the top-up financing; and (iii) advanced Avalon $3,000,000 for the 2023 Debenture. The 2023 Debenture bears interest at 7.115% per annum and the principal and interest are payable on maturity, being June 14, 2025 (the "Maturity"). To the extent not repaid at Maturity by Avalon, Sibelco will have the right to convert the outstanding principal amount of the 2023 Debenture and all accrued and unpaid interest thereon into either additional Common Shares at a conversion price equal to the Per Share Price, or an additional 5% interest in the joint venture corporation (the "JV Election"), as more particularly described below. The 2023 Debenture is a secured obligation, secured by a pledge of Avalon's shares of SRL.

Avalon also granted to Sibelco, for so long as Sibelco holds not less than 10% of the issued and outstanding Common Shares on a non-diluted basis, the right to nominate one member to the board of directors of Avalon ("Board") (or up to two nominees if the size of the Board is increased to nine directors or more), and the right to participate in future equity offerings so that it can maintain its pro rata percentage ownership in Avalon. Sibelco also agreed to a 12-month standstill and certain resale restrictions placed on its holdings in Avalon.

The proceeds from the Private Placement were used by Avalon to fund the acquisition of industrial land for a lithium-hydroxide processing facility in Thunder Bay, Ontario, repayment of existing debt, and for working capital and general corporate purposes. As described below, Avalon subsequently completed the acquisition of the Thunder Bay property for cash consideration of $8.3 million, and

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repaid the balance of its note payable, after the permitted conversions into common shares, at its face value of $1,200,000 in cash.

Joint Venture

During Fiscal 2024, Avalon and Sibelco completed the establishment of their joint venture with respect to Avalon's lithium projects, including Separation Rapids and Lilypad in northwestern Ontario, with the execution of a Tripartite Purchase and Sale Agreement (the "Purchase and Sale Agreement"), a Joint Venture Company Shareholders Agreement (the "JV Agreement") with Sibelco and the joint venture company, Separation Rapids Ltd. ("SRL"), SRL is jointly owned by Sibelco (60%) and Avalon (40%).

Sibelco, which acts as operator of SRL, has committed to invest €34.8 million (approximately C$51.3 million) into the joint venture. Of this amount, €4.8 million was advanced concurrently with the contribution by Avalon of its interests in the Separation Rapids and Lilypad projects, with an additional €30 million to be advanced in tranches to fund the development of the joint venture mineral projects, including facilities and related infrastructure. After total cash contributions of €34.8 million by Sibelco, each of the parties will make any further cash contributions on a pro-rata basis (with dilution to a non-contributing party's interest).

While the initial participating interests to be held on the formation date of the joint venture by Sibelco and Avalon are 60% and 40%, respectively, such participating interests may change to 65% and 35%, respectively, if on the Maturity date of the 2023 Debenture Avalon fails to pay the full principal and accrued interest and Sibelco elects to exercise the JV Election.

Subsequent to the end of the Fiscal Year, as described under Liquidity and Capital Resources, the 2023 Debenture was replaced by the 2024 Debenture. Should the 2024 Debenture not be repaid by the Company at maturity and if the entire amount of the 2024 Debenture and accrued interest is converted to common shares of SRL at maturity, then Sibelco's equity interest in SRL will be increased by 30% to 90%, with the Company owning the remaining 10%. Sibelco will also have the right to exercise its conversion rights prior to maturity if the Company does not make certain reductions in its corporate and administrative costs.

Pursuant to the terms of the Purchase and Sale Agreement, Avalon transferred the Separation Rapids and Lilypad properties to SRL, including all personal property, assumed contracts, permits, books and records in consideration for approximately €23.2 million (approximately C$34.1 million), representing a 40% interest in SRL together with reimbursements of approximately C$903,000 plus HST in funds expended by Avalon on the joint venture properties since the signing of a binding joint venture term sheet in June 2023.

The Company has determined that the present value of Sibelco's total cash contributions to be $39,560,511 using the following assumptions:

the remaining €30,000,000 will be funded periodically during the third calendar quarter of 2024 through the first calendar quarter of 2027 (the "additional funding Period")
the annual discount rate of 12.34%
the estimated average exchange rate of the Euro to the Canadian Dollar during the additional funding period will be 1.482.

The total fair value of the net assets SRL on November 9, 2023 is therefore $65,934,187, and the fair value of the Company's contribution is $26,373,675.

The net carrying costs of the Separation Rapids and Lilypad Projects totaled $16,835,853 ($16,910,853 less estimated closure cost provisions of $75,000). Accordingly, the total gain on disposal is $9,537,822 and the Company has recognized a gain of $5,722,693 (representing the realized gain on the 60% interest disposed of to Sibelco) and has recorded the Company's 40% equity interest in SRL at $22,840,297 (the total of the net carrying costs of $16,835,853, realized gain of $5,722,693 and transaction costs of $281,751).

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Lake Superior Lithium Project

With both the Ontario and Federal Governments confirming their interest in establishing new battery materials supply chains in the province, and potentially providing financial support, Avalon continues to work towards establishing its lithium conversion facility in Thunder Bay, Ontario. The planned facility would be adaptable and expandable to increase output and accept concentrates from other producers of the various pegmatite deposits that occur in northwestern Ontario and globally. It is the Company's intention to construct a regional processing hub with multiple off-take agreements with third-party producers, to meet the rising demand for EV battery-grade lithium in southern Ontario and more broadly, North America. During the quarter ended August 31, 2023, Avalon acquired an industrial site in Thunder Bay, Ontario (965 Strathcona Avenue) (the "Thunder Bay Property") for the purchase price of $8,300,000. The Thunder Bay Property consists of approximately 377 acres of which approximately 154 acres are on land and 223 acres are in Lake Superior and shoreline land, a 24,000 square-foot office building and a 55,000 square-foot warehouse. It has existing road, rail, and deep-water port access, as well as existing utilities services adequate for supporting the Company's planned lithium-hydroxide (LiOH) processing facility.

With its existing infrastructure, strategic geographic location and multi-channel accessibility, the Thunder Bay property is uniquely suited to host a regional lithium hydroxide conversion facility and represents a material advantage for Avalon that the Company intends to aggressively widen through the adoption of market leading processing and recycling technologies, as well as the construction of an on-site Technology and Innovation Centre ("TIC"). Avalon has progressed discussions with both Lakehead University as well as Confederation College, two regional educational institutions, to collaborate on the initiative, as well as a range of technology partners in Ontario and the U.S..

In October 2023, the Company expanded a strategic partnership with Metso to advance the development of the Thunder Bay facility. Metso agreed to provide testing and engineering equipment procurement and related services, as well as co-develop a laboratory for research and development on lithium and clean technology solutions. Avalon and Metso also agreed to cooperate on the recycling of used batteries and the refining of battery chemicals for recycle use.

The expanded partnership agreement followed a memorandum of understanding entered into in July 2023 that enabled Metso and Avalon to develop an innovative, sustainable methodology to economically produce commercial lithium hydroxide from spodumene as well as petalite mineral feeds.

Avalon's focus is also on building upon its relations with First Nations partners, the local community and local government. Deepening this collaboration is key to ensuring members of the regional ecosystem all benefit from the project and that all parties prioritize environmental stewardship. First Nations communities are valued partners and the Company looks forward to an ongoing dialogue of mutual respect and seeking innovative partnerships in the new green economy.

The Company also continues to advance discussions with a range of other parties interested in participating in the project and helping contribute to the province's industrial competitiveness.

When complete, the integrated project will:

Create a significant number of jobs in the City of Thunder Bay, Ontario and surrounding regions.
Enable broader development of northwestern Ontario's lithium assets by producers seeking to utilize the proximity of Avalon's processing capacity.
Create tangential socioeconomic and educational benefits, including the planned creation of a regional critical-minerals innovation and technology hub in partnership with local university and college stakeholders.
Create new economic development opportunities for local and regional First Nations and Métis communities.
Demonstrate best-in-class environmental and sustainability process innovation and enable novel Canadian IP.

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Create supply chain efficiencies by connecting lithium assets in the north with regional processing capacity, thus leading to a decreased life-cycle carbon footprint compared to producers who ship raw materials to processing facilities overseas.

Localizing the EV battery supply chain creates a multiplier effect of investment opportunities. In the United States, the passing of the Inflation Reduction Act (IRA) in August 2022 has spurred more than US$70 billion worth of new investment announcements across the battery supply chain. These investments help stimulate local economic development by supporting surrounding industries, fostering spinoff entrepreneurship, and contributing to the development of industry clusters that improve productivity and growth.

A study was completed in early June 2024 on an order of magnitude site infrastructure valuation (the "Site Valuation Report") prepared by AFRY Canada for the site of Avalon's proposed lithium processing facility in Thunder Bay, Ontario. The report highlights that the replacement cost of the infrastructure at Avalon's Thunder Bay site, factoring in its current condition, is estimated to be $46 million. In addition, the land value is estimated at between $11 to $16 million, which brings the total estimate of the site value to be between $57 to $62 million. The findings highlight the value proposition inherent in Avalon's Thunder Bay site including existing buildings, underground services, electrical services, rail spurs and a deep-water port.

A preliminary economic assessment study (the "PEA") has been completed on the planned lithium hydroxide conversion facility on Avalon's Thunder Bay site. Avalon engaged DRA Americans Inc., a 100% owned subsidiary of DRA Global to lead the study and featured the environmentally friendly Metso lithium conversion technology. The PEA also included the full infrastructure layout with lithium concentrate reagent receiving and storage, processing, and site infrastructure as well as shipping/handling of product and a means to remove the byproduct off site. As well, a preliminary environmental permitting pathway and timeline was outlined within the study. The financial economics of the project was assessed, and the results were positive with an after-tax net present value ("NPV") at 8% discount rate of $4.1 billion over a 30-year processing life and an after-tax internal rate of return ("IRR") of 48%.

The study summary outcome is outlined in Table 1 below. The study assumes a spodumene concentrate price of $1,360/tonne (USD$1,000/tonne) for the 30-year life of the project. The spodumene concentrate is expected to be sourced through competitive offtake agreements, purchasing of spodumene feed from neighbouring mines, and potentially being supplied by the Separation Rapids Ltd. Joint Venture.

The long-term pricing of lithium hydroxide is assumed to be $35,360 /tonne (USD$26,000/tonne). A Clean Technology Manufacturing Industrial Tax Credit of 30% was applied against the initial capital cost.

Table 1: Project Summary Financial Outcomes

Items	Units	PEA Sept. 2024
Operating Life	years	30
Steady State Annual Spodumene Feed	tpa	196,000
Spodumene Concentrate Pricing @ 6%	$ per tonne	1,360
Annual LiOH Production	tpa	30,000
LiOH Sale Price (long term) Life of Project	$ per tonne	35,360

Avalon Advanced Materials Inc.

Total Capital Cost	$Billion	1.3
After-Tax Net Present Value (NPV) @ 8% discount rate	$Billion	4.1
After-Tax Rate of Return (IRR %)	%	48
Steady State LiOH Conversion Costs	$/t LiOH	3,898
Spodumene Purchase Cost Delivered to Site	$/t LiOH	9,131
After-Tax Payback	years	2.5

Work is underway now to prepare for continued study work to advance through a feasibility study over 2025 and early 2026 pending available financing. The preliminary schedule shows start of construction by Q3 2027 and first production in Q4 2028 but will be highly dependant on the permitting phase timing for the earliest start.

Avalon is currently considering a solar farm on its Thunder Bay property. The site includes approximately 46 acres of land on a former landfill that may be suitable as a solar facility. Avalon is exploring the possibility of behind-the-meter generation for its own use as a direct source of power for the lithium conversion facility or as a participant in a future Independent Electricity System Operator (IESO) procurement that would see the on-site generation used to supply power to the bulk electricity system or grid.

Two white papers have been prepared for submission to the Department of Defense (DOD) and the Industrial Base Analysis and Sustainment (IBAS) Program in the United States. The papers address the significant contribution that a lithium hydroxide facility would provide in the supply of battery grade lithium hydroxide or carbonate for the EV industry. The first paper was submitted to seek funding for study work towards a final definitive feasibility for the Company's proposed lithium hydroxide facility while the second paper was submitted to seek funding for the engineering and construction phase of the project. The white papers provided a preliminary estimate for the capital expenditures of the project and timeline for spend and an approximate ask for the funding. There has not been any response to date on the status of the white paper application. At this time, it is uncertain if Avalon will be successful in securing government funding.

Subsequent to the end of the Fiscal Year, Avalon released the results of a third-party economic and labour study was conducted by RIAS Inc. (RIAS), an Ottawa-based consulting firm. The report was based on the recent PEA and customized input-output multipliers from Statistics Canada, and details the significant economic and labour impacts from the Lake Superior Lithium Project. The report concluded that the project will have a significant economic multiplier effect across the Thunder Bay community, to the Northwestern Ontario region, to the province, and to the country through GDP, labour income, and employment. The study assessed the economic impacts of the two principal phases of the Project: construction, beginning in 2027, and operations, starting in 2028.

Subsequent to the end of the Fiscal Year, Avalon entered into a memorandum of understanding with Qualcomm Technologies Inc. (the "MOU") on a strategic collaboration focused on the Lake Superior Lithium Project, advancing cutting-edge digital solutions that enhance operational efficiency and optimize data management. Under the MOU, Avalon intends to leverage Qualcomm Technologies' Industrial & Edge technologies to create a robust digital infrastructure to support mining activities across Avalon's operations. The collaboration will involve developing a strategic roadmap for Internet-of-Things (IoT)- enabled solutions, with an emphasis on commercialization over the next few years.

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During the quarter ended August 31, 2024 (the "Quarter"), the Company incurred $437,392 (2023 - $Nil) in project development costs on the Lake Superior Lithium Project. These expenditures were incurred primarily for the PEA study.

During the Fiscal Year, the Company incurred $600,921 (2023 - $Nil) in project development costs on the Lake Superior Lithium Project. Approximately 93% of these expenditures were incurred on the PEA study and 7% on the Site Valuation Report.

Resource Development Activities

Resource property expenditures for the Quarter totalled $21,087, a 95% decrease from the level of expenditures in the comparative quarter in 2023 ($449,653). This decrease was primarily related to the transfer of the Company's Separation Rapids and Lilypad projects to SRL in November 2023. Of these expenditures, 100% were incurred on the Nechalacho Project ("Nechalacho").

No properties were abandoned or impairment losses recorded during the Quarter or the Fiscal Year.

Expenditures on resource properties for Fiscal 2024 totalled $57,598, a 98% decrease from the level of expenditures for the year ended August 31, 2023 ("Fiscal 2023") which totaled $3,035,056. Of these expenditures, 8% were incurred on Separation Rapids, 6% were incurred on the Lilypad Project, and 85% were incurred on Nechalacho. Expenditures on the Separation Rapids Project decreased to $4,661 from $3,002,904 in Fiscal 2023, primarily due to Sibelco reimbursing the Company for its expenditures on the Separation Rapids project prior to it being transferred to SRL. The expenditures on the Lilypad Project totaled $3,730 compared to $5,178 for the prior period, as the Company did not conduct any significant activities during the Year prior to transferring the Lilypad Project to SRL. Expenditures on the Nechalacho Project were at a similar level, totalling $49,207 in Fiscal 2024 compared to $26,974 in Fiscal 2023.

During Fiscal 2023 the Company recognized an impairment loss of $15,000 related to its net smelter returns ("NSR") interest in the Wolf Mountain Platinum-Palladium Project, and an impairment loss of $3,050 related to certain mineral claims that had expired.

Separation Rapids Lithium Project

The Separation Rapids property consists of nineteen mineral claims and one mining lease covering a combined area of approximately 4,414 hectares (10,910 acres) in the Paterson Lake Area, Kenora Mining Division, Ontario. The lease covers an area of approximately 421 hectares over the area of the main lithium pegmatite deposit (the "Big Whopper") and adjacent lands that may be used for mine development infrastructure. Avalon also owned three aggregate permits along the road to the site, which cover a total area of approximately 16 hectares and are located within the area covered by the claims. The project is located in the traditional land use area of the Wabaseemoong Independent Nations ("WIN") for which they have stewardship under an agreement with the Province of Ontario.

As described above, the Separation Rapids Lithium Project was transferred into SRL in November 2023.

In October 2023, Avalon, with Sibelco's approval, and for the benefit and cost of SRL, commenced a new comprehensive $3.6 million drilling program at Separation Rapids. The drilling campaign was completed by Sibelco in early March 2024 and focused on expansion and infill drilling in efforts to upgrade 2023 MRE classification and to expand the mineral resource. A total of 8,921 metres were drilled.

Work has commenced on an updated mineral resource estimate, which is expected to be completed by SLR Consulting by the end of December 2024 or early 2025.

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Drilling Highlights include:

SR24-114 intersected 1.67% Li₂O over 105.6 metres from 313.5 metres depth and 1.78% Li₂O over 21.5 metres from 143.5 metres depth
SR24-113 intersected 1.68% Li₂O over 66.2 metres from 292.2 metres depth and 1.95% Li₂O over 32.6 metres from 121.0 meters depth
SR24-115 intersected 1.81% Li₂O over 13.8 metres from 93.5 metres depth
SR24-116 intersected 1.69% Li₂O over 8.9 metres from 313 metres depth and 1.67% Li₂O over 12.7 metres from 325.3 metres depth
SR24-121 intersected 1.54% Li₂O over 136.95 metres from 321.00 metres depth including 2.28% Li₂O over 4.00 metres from 421.00 metres depth
SR24-119 intersected 1.87% Li₂O over 17.15 metres from 284.40 metres depth
SR24-120 intersected 1.60% Li₂O over 12.80 metres from 66.15 metres depth

All quoted intersections comprise a cutoff grade of 0.5% Li₂O. All significant assay intervals with true widths are reported in the news releases dated July 22, 2024 and August 19, 2024.

Other highlighted work on Separation Rapids Project

Geotechnical & mineralogical studies continued to advance through the year to facilitate a higher confidence in mine design and planning as well as advance the process design and optimization to a higher level of understanding.
Phase 1 hydrogeological testing & evaluation has begun this fall and will be followed up with a phase 2 evaluation and review in 2025
Environmental field work as part of the baseline and permitting process was completed mid summer
Engagement with local communities is on-going and continues
Preparation for exploration has commenced

The technical information on the Separation Rapids Project has been reviewed and approved by Dr. Andrew Ramcharan, Vice-President, Corporate Development. Dr. Ramcharan is a qualified person for the purposes of National Instrument 43-101.

Lilypad Cesium-Tantalum Project

The Lilypad Cesium-Tantalum Project consists of 14 claims, comprising 166 new claim units or cells, totalling approximately 3,300 hectares (8,152 acres), covering a field of lithium, cesium, tantalum ("LCT") mineralized pegmatites, and located 150 kilometres northeast of Pickle Lake, Ontario. The project is located in the traditional territory of the Eabametoong First Nation ("EFN"), approximately 25 km west of the community of Fort Hope. As discussed earlier under "Strategic Partnership", the Lilypad Project was transferred to SRL in November 2023.

Nechalacho Rare Earth Elements and Zirconium Project

The Nechalacho Rare Earth Elements Project is located at Thor Lake in the Mackenzie Mining District of the Northwest Territories ("NWT"), approximately 100 kilometres southeast of the City of Yellowknife. The property is comprised of eight contiguous mining leases totalling 5,786 hectares (14,297 acres), after three mining claims totalling 332 hectares on the southwest side of the original five leases were converted to mining leases. The original five leases are subject to one independently owned 2.5% Net Smelter Returns ("NSR") royalty agreement. Avalon has the contractual right to buy out this royalty on the basis of a fixed formula, which is currently approximately $2.0 million, and which will increase at a rate equal to the Canadian prime rate until the royalty is bought out.

During Fiscal 2020, Avalon sold the rights to the near-surface dominantly light rare earth mineral resources above a depth of 150 metres ("Upper Zone Resources") to Cheetah Resources Pty Ltd.

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("Cheetah"). Avalon retained a 3.0% NSR royalty (the "3.0% NSR Royalty") and will continue to have access to the property for development and mining of its 100% owned Basal Zone heavy rare earth resource. Avalon has also agreed to waive the 3.0% NSR Royalty for the first five years of Cheetah's commercial production and to grant Cheetah the option to pay the Company $2 million within eight years of the transaction closing to extend the waiver of this royalty in perpetuity. Cheetah also has the option to purchase the Company's option in the 2.5% NSR Royalty, provided that, upon exercising the option, it extinguishes this royalty. The eight mining leases are jointly recorded in the names of Cheetah 50% and the Company 50%, while the beneficial ownership is held in trust by Cheetah and Avalon as to their respective beneficial ownership entitlement in and to the Upper Zone Resources and the Basal Zone Resources, respectively.

Avalon and Cheetah have formed a jointly-owned corporation ("NWT Rare Earths Ltd.") to hold the exploration permits and related authorizations related to Nechalacho and have also entered into a co-ownership agreement governing each party's activities and management at site. On November 30, 2020, a new Land Use Permit, expiring November 29, 2025, and Water License, expiring November 29, 2027, were approved for both the Cheetah Demonstration Project and the previously approved Basal Zone early works construction activities.

Rare earth elements ("REE") belong to the lanthanide series of metals and are important in an expanding array of applications in technology related to energy efficiency and a cleaner environment. Common uses of these metals are in magnets for electric vehicles and wind turbines, solar panels, and cell phones. REEs are also a critical component in numerous military defense systems, making a reliable supply chain of these elements an important strategic matter for many governments, including Canada and the US. Currently China produces about 60% of the world's REEs and supplies about 80% of REE imports into the US.

The Basal Zone heavy rare earth elements ("HREE") resource also contains abundant zirconium mineralization averaging over 3% ZrO₂. Zirconium cladding is usually an alloy of zirconium, tin, iron, nickel and chromium and is used in the fuel rods of commercial nuclear electric generator plants as well as military reactors including nuclear submarines. China currently has a dominant position in the supply and processing of zirconium as well as rare earths.

In August 2022 the United States adopted the Inflation Reduction Act which refers to the Bipartisan Infra-Structure Law's that provides a definition for Foreign Entities of Concern ("FEOC"). The United States Government release of the Guidance of FEOC issued on December 1, 2023, which provides clarity and purpose of supporting critical mineral projects that are not owned or controlled by or subject to the jurisdiction or direction of a government of a covered country: China, Iran, Russia, North Korea. The Company's Nechalacho rare earth and zirconium deposit is unique in its composition of minerals, large size of deposit, safety of jurisdiction and proximity to the United States.

A white paper has been written for submission to the DOD and the Industrial Base Analysis and Sustainment Program in the United States. The paper addresses the significant contribution that Nechalacho can provide with its current resource of rare earth, zirconium and niobium. The demand for products from the Nechalacho Project is expected to increase significantly over the coming years and will support new advancements in up-and-coming technologies and material used in the nuclear industry, science and in the defence industry to improve the "Warfighter" needs. Submission of the paper would seek low interest loans or grants to further progress the project study work and eventual construction. There has no been any response to date on the status of the white paper application. At this time it is uncertain that Avalon will be successful in securing government funding.

The Company is planning a new test program on mineralized material from the Basal Zone. The test work would focus on production of carbonate products of LREE, HREE and Zirconium concentrate and further test methods of separation to specific oxides. The objectives of this test program are to find a streamlined approach to processing and enhance the economics of the project while refining the current strategy of marketing of the various concentrates and/or oxide products.

The details of the test program are currently under review with a phased budget. The timeline to start the work is expected to be Q2 2025 and will depend on aligned financing to complete the program.

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Expenditures during the Quarter were $21,087 (2023 - $4,500), which were incurred primarily on ongoing site holding and sample storage costs and preparatory work on updating certain metallurgical testwork.

Expenditures during the Fiscal Year were $49,207 (2023 - $26,974), which were incurred primarily on ongoing site holding and sample storage costs.

East Kemptville Tin-Indium Project

The 100% owned East Kemptville Tin-Indium Project is located 55 km northeast of Yarmouth, Nova Scotia, Canada. The property consists of an exploration licence covering 1,165 hectares (2,880 acres). East Kemptville was an operating tin mine from 1985-1992 and was North America's only large primary tin producer, before closing prematurely in 1992 due to a collapse in tin prices. Increasing global demand for tin and tightening supplies has resulted in significantly improved tin prices, creating an opportunity for Avalon to reactivate the site, initially by processing a large historical stockpile of tin ore using low-impact sensor-based ore-sorting technology.

The Company completed a preliminary economic assessment during fiscal 2018 with a development model of utilizing the existing tailings management area ("TMA") and had been in negotiation with the surface rights owner to secure full tenure to the project site. An agreement in principle was reached in fiscal 2019, however, the surface rights owner subsequently refused to sign the agreement and denied Avalon access to the site after putting a hold on any new work on all of its closed mine sites.

No significant expenditures were incurred during the Quarter or Fiscal Year on the East Kemptville Tin-Indium Project. During the Fiscal Year, the Company disposed of a residential located near the site which it had acquired to support site operations property for gross proceeds of $165,000, and realized a gain of $93,818. The Company continues to retain the mineral rights through its exploration licence, and management remains optimistic that the Company will eventually be able to secure access to the site again to resume reactivation plans.

Warren Township Anorthosite Project

The Warren Township Anorthosite Project is a mineral development opportunity located near the Village of Foleyet, 100 kilometres west of Timmins, Ontario. The project consists of a mining lease totalling 688 hectares (1,699 acres) that includes an aggregate permit over the historical quarry site and which is 100% owned by the Company. The lease covers a portion of the Shawmere Anorthosite Complex hosting a historic resource (not prepared in accordance with NI 43-101) of a high purity calcium feldspar. The calcium feldspar product is used in the manufacture of reinforcing glass fibre and other industrial products, such as mineral fillers.

There has also been demand for small quantities of the crushed anorthosite rock for use as a "lunar simulant" due to its mineralogical similarity with dust on the surface of the moon. Subsequent to the end of the Fiscal Year, a 20-tonne test sample of anorthosite was successfully extracted and shipped to a third party company for testing with the NASA moon rover. If successful, there may be larger future quantities based on their needs.

No significant expenditures were incurred on the property during the Quarter or the Fiscal Year on the Warren Township Anorthosite Project.

Corporate Social Responsibility

In December, 2024 the Company intends to release its 2024 Sustainability Report, which will be available for download at: https://www.avalonadvancedmaterials.com. In February 2021 the Company announced receiving an Environmental, Social and Corporate Governance ("ESG") Risk Rating, following an independent audit of the Company's business practices and policies, performed by Sustainalytics, a Morningstar company. Avalon received an ESG Risk Rating of 28.9 in its industry, Diversified Metals, and ranked among the top 5% of 150 industry companies analyzed globally. The

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benefits of obtaining an ESG Risk Rating include the ability to provide better access to ESG investment capital, and the ability to gain commercial benefit from the rating externally with creditors, suppliers and other stakeholders.

Avalon's annual Sustainability Report is based on International Sustainability Standard Board (ISSB) reporting structure, which is aligned with the International Accounting Standard Board. The ISSB is the most popular reporting structure in Canada. Avalon's annual Sustainability Reports incorporate a self-assessment of Fiscal year performance and also set targets for the next fiscal year against the applicable Mining Association of Canada "Toward Sustainable Mining" indicators. A review and update of the Sustainability Policy has been initiated to formalize the significant progress the Company has made in sustainability and to ensure its industry leadership is maintained.

Avalon continues its commitment to working closely with its Indigenous partners to create lasting economic and social benefits in the communities. The Company seeks to be a proactive partner with the Indigenous communities in the traditional territories in which Avalon operates. Further, Avalon has developed and published its first Land Acknowledgement, which reads as follows:

"Avalon Advanced Materials Inc. acknowledges that our work takes place within the ancestral and traditional territories of First Nations and Métis people. We respect Indigenous rights and are committed to deepening our existing relationships while forging new and lasting ties which will ensure we and future generations benefit from the positive social and economic opportunities related to our operations."

The Company's main focus is on materials that enable clean technology, including electric vehicles, power storage, solar and wind power. In order to do this sustainably, Avalon designs its operations to minimize environmental impacts and greenhouse gas emissions, while planning for rehabilitation and productive use of the land post closure. The Company also now incorporates a staged-development approach to its cleantech materials projects, which involves starting production at a modest scale, to minimize project footprint and potential risks to the environment, while also reducing investment risk and creating opportunities for its Indigenous business partners.

In response to the increasing concern expressed by regulators, insurers, investors, customers and other communities of interest, and building on its historic success in reducing greenhouse gas emissions, Avalon remains committed to becoming carbon neutral by 2040. Avalon believes this will give the Company a competitive advantage in its ongoing efforts to obtain ESG investors and government funding.

Being a recognized sustainability leader reduces costs and facilitates good relationships with all stakeholders, including Indigenous communities, which can help reduce risk of experiencing lengthy delays in receiving operating permits and approvals. This also helps facilitate the acquisition of our social license to operate. Avalon believes that responsible users of our cleantech materials will require increasingly sustainable sources for their materials.

Avalon's leadership in applying the principles of sustainability in all of the Company's work is also benefitting the mineral exploration industry generally. Avalon supports the PDAC, the Ontario Mining Association and the Mining Association of Canada in their efforts to educate regulators and policymakers regarding the need to update regulations in order to encourage more and sustainable development of critical minerals resources in Canada that are vital for establishing the new clean economy in Canada and to ensure access to land for exploration purposes.

Selected Annual Information

The following selected financial data for each of the three most recently completed fiscal years are derived from the audited annual financial statements of the Company, which were prepared in accordance with International Financial Reporting Standards ("IFRS Accounting Standards"), as issued by the International Accounting Standards Board ("IASB").

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For the Years Ended August 31,	2024	2023	2022
	$	$	$
Revenue	109,832	124,258	21,766
Net loss	634,576	3,317,059	3,945,843
Net loss, per share basic and diluted	0.001	0.007	0.010
Total assets	136,378,561	131,053,334	120,446,917
Total long term liabilities	3,881,533	3,549,419	4,689,179
Cash dividends	-	-	-

The Company has recorded losses in each of its three most recently completed fiscal years and expects to continue to record losses until such time as an economic mineral deposit is developed and brought into profitable commercial operation on one or more of the Company's properties, or is otherwise disposed of at a profit. Since the Company has no ongoing revenue from operations, annual operating losses typically represent the sum of business expenses, any gains or losses realized on disposition of its assets, any impairment losses recognized on its mineral properties and adjustments to the fair value for the derivative liabilities and convertible notes payable. The Company may increase or decrease its level of business activity in coming years and if it does, investors can anticipate that the Company's annual operating losses will also increase or decrease until an economic operation is brought into profitable commercial production, or one or more of the Company's properties are disposed of at a profit.

Administration and Other

Interest income for the Quarter totalled $13,684 compared to $27,238 in the same quarter in Fiscal 2023, due to lower cash balances and interest rates. A portion of the land from the Company's Thunder Bay Property was rented out to a third party since its acquisition in June 2023 to November 30, 2023 and generated rental revenue of $45,000 and $54,000 for the fourth quarter of Fiscal 2023 and the first quarter of Fiscal 2024, respectively.

Corporate and Administrative expenses totalled $987,717 during the Quarter, a 27% increase from the amount incurred during the comparative quarter in Fiscal 2023 (2023 - $779,961). The main areas of increased expenses for the Quarter were expenses on salaries and benefits, and expenses on market development and government relations.

Salaries and benefits increased by $55,832 (12%) to $522,779 during the Quarter compared to $466,947 for the same quarter in Fiscal 2023. The increase is primarily related to the accrued bonuses of $182,500 awarded to certain employees relating to their services in Fiscal 2024 and severance payment provision of approximately $47,000 for an employee terminated in the Quarter. These increases were partly offset by the $152,009 in salaries and benefits that were charged to project development costs for the Lake Superior Lithium Project.

Expenses on market development and government relations increased by $143,978 to $156,854 during the Quarter, compared to $12,876 for the same quarter in Fiscal 2023. The increase is primarily due to the increased level of activities carried out by external consultants in assisting the Company in identifying the various sources of government fundings and with the planning and application of these potential fundings for the Company's development of its planned lithium-hydroxide processing facility in Thunder Bay as well as its Nechalacho REE Project and increased travel for meetings with potential partners.

The Company incurred property holding costs of $37,152 (2023 - $47,232) during the Quarter relating to its Thunder Bay Property, which was purchased during the quarter ended August 31, 2023.

Share based compensation decreased by $284,262 to $43,045 for the Quarter compared to $327,307 for the same quarter in Fiscal 2023. $147,877 of the decrease is related to the 1,020,000 Deferred Share Units ("DSUs") granted to certain directors during the fourth quarter in Fiscal 2023. These DSUs were fully vested at the time of grant. No DSUs were granted in the Quarter. The balance of

Avalon Advanced Materials Inc.

the decrease is primarily related to the decreased number and value of options earned during the Quarter compared to the same quarter in Fiscal 2023.

Finance costs increased to $215,293 for the Quarter compared to $51,890 for the same quarter in Fiscal 2023. The increase is mainly related to the amortization of deferred financing costs recognized during the Quarter on the convertible note payable which was issued during the quarter ended May 31, 2024.

At each reporting period date, the fair values of the Company's outstanding derivative liabilities (which included the warrants with exercise prices that are subject to adjustment from time to time in the event of certain common share rights offerings) were remeasured using the Black-Scholes pricing model, which resulted in a gain of $2,730 for the Quarter and a gain of $197,486 for the Fiscal Year, respectively, compared to a loss of $133,562 and a gain of $325,444 in the comparable quarter and in Fiscal 2023, respectively. The changes in the estimated value of these warrants are mainly caused by the fluctuation in the trading price of the Company's common shares between the beginning and end of the reporting periods.

The Company recognized a gain of $5,722,693 (representing the realized gain on the 60% interest disposed to Sibelco) during the Fiscal Year, upon completion of the sale/transfer of its Separation Rapids and Lilypad projects to SRL.

Interest income for the Fiscal Year totalled $55,832 compared to $79,258 for Fiscal 2023.

For the Fiscal Year, corporate and administrative expenses totalled $4,315,513 compared to $3,090,055 for Fiscal 2023. The main areas of increased expenses for the Fiscal Year were, expenses on salaries and benefits, and expenses on market development and government relations, which was partly offset by the decreases in community, public and investor relations expenses.

Salaries and benefits for the Fiscal Year increased by $1,235,049 to $2,520,829, compared to $1,285,780 in Fiscal 2023. Total bonuses of $532,575, and 182,500 were awarded to the Company's employees during the Fiscal Year related to their services for Fiscal 2023, and Fiscal 2024 respectively, (bonuses totaling $440,875 to senior management employees were settled in RSUs), approximately $127,000 of the increase were related to severance payment provision for certain terminated employees. The balance of the increase is primarily related to the increased number of senior management employees in the Fiscal Year compared to Fiscal 2023.

Consistent with the Quarter and for similar reasons, expenses on market development and government relations increased by $344,875 to $376,072 during the Fiscal Year, compared to $31,197 for Fiscal 2023.

Expenses on community, public and investor relations for the Fiscal Year decreased by $458,350 (43%) to $602,422, compared to Fiscal 2023. The decrease is primarily due to the reduced spending on TV and internet-based advertising campaigns and the reduced level of investor relations activities carried out by external consultants.

The Company also incurred property holding costs of $364,286 (2023 - $47,232) during Fiscal 2024 relating to its Thunder Bay Property. These holding costs were partly offset by rental revenue of $54,000 (2023 - 45,000). A portion of the land from the Thunder Bay Property was rented out to a third party since its acquisition in June 2023 to November 30, 2023.

The Company's finance costs increased by $431,431 to $499,389 for the Fiscal Year compared to $67,958 for Fiscal 2023. The increase is mainly related to the amortization of deferred financing costs recognized on the convertible note payable which was issued during the third quarter of Fiscal 2024, and the interest expense recognized on the 2023 Debenture payable which was issued during the fourth quarter in Fiscal 2023.

The company also recorded financing transaction costs of $137,666 during Fiscal 2024 relating to the issuance of the convertible note payable.

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During the year ended August 31, 2021, the Company entered into a binding letter of intent (the "LOI") to purchase ownership of 2333382 Ontario Inc. ("2333382"), a private Ontario corporation which owns four industrial minerals properties and a demonstration-scale processing plant located at Matheson, Ontario. This LOI had been terminated and the initial payment of $419,200 was written off during Fiscal 2023.

Share based compensation decreased to $449,075 from $633,719 during the Fiscal Year compared to Fiscal 2023. This decrease is primarily related to the decreased number of DSUs earned and the associated fair value recognized during the Fiscal Year compared to Fiscal 2023 and the decreased value of stock options earned during Fiscal 2024.

Summary of Quarterly Results

The following selected financial data is derived from the unaudited condensed consolidated interim financial statements and financial information of the Company.

Fiscal Year	2024				2023
For the Quarters Ended	Aug. 31	May 31	Feb. 29	Nov. 30	Aug. 31	May 31	Feb. 28	Nov. 30
	$	$	$	$	$	$	$	$
Revenue	13,684	19,468	6,889	69,791	72,238	11,394	24,724	15,902
Net income (Loss)	(1,808,873)	(1,353,168)	(1,524,051)	4,051,516	(1,222,736)	(963,124)	(776,075)	(355,124)
Income (Loss) per share, basic	(0.003)	(0.002)	(0.003)	0.007	(0.002)	(0.002)	(0.002)	(0.001)
Income (Loss) per share, diluted	(0.003)	(0.002)	(0.003)	0.007	(0.002)	(0.002)	(0.002)	(0.001)

The fluctuation in quarterly net loss is primarily due to the recognition of share based compensation expenses as stock options, DSUs and RSUs granted to directors, officers, employees and consultants of the Company are earned, the impairment losses recognized on resource properties, changes in the fair value of derivative liabilities, write-off of business acquisition costs and expensed financing transaction costs, and any gain/loss realized on disposition of its assets. The costs of resource properties are written down at the time the properties are abandoned or considered to be impaired in value.

Liquidity and Capital Resources

In management's view, given the nature of the Company's operations, which consist mainly of the exploration and development of mineral properties, the most relevant financial information relates primarily to current liquidity, solvency, and planned project expenditures. The Company's financial success will be dependent on the economic viability of its resource projects, the development of its lithium-hydroxide processing facility and the extent to which it can develop its mineral resources. Such development may take several years to complete, and the amount of resulting income, if any, is difficult to determine until firm offtake commitments with third parties have been secured. The sales value of any mineralization discovered by the Company is largely dependent on factors beyond the Company's control, including the negotiated value of the critical minerals products to be produced.

The Company manages its capital structure and makes adjustments to it based on the funds available to the Company in light of changes in general economic conditions, the Company's short-term working capital requirements, and its planned exploration and development program expenditure requirements.

As the Company is in the development stage, its principal source of capital is from the issuance of equity securities although it is now trying to access debt financing to fund the lithium processing site development and reduce share dilution. In order to achieve its objectives, the Company expects to

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spend its existing working capital and raise additional funds as required, including flow-through equity financing to fund exploration drilling work and some debt financing.

During the quarter ended August 31, 2023, the Company completed the Private Placement and issued to Sibelco, 109,692,764 common shares for aggregate proceeds of $10,000,000, 1,793,722 common shares for aggregate proceeds of $197,309.42 in a subsequent "top-up" financing, and the 2023 Debenture in the principal amount of $3,000,000 for cash proceeds of $3,000,000, and entered into a binding term sheet with Sibelco to establish a Joint Venture with respect to certain of the Company's lithium mining projects located in northwestern Ontario, with Sibelco as the operator.

During the first quarter of the Fiscal Year, the Company contributed its Separation Rapids and Lilypad projects to SRL at a deemed value of €23,243,873 and received 40% of the common shares of SRL. Sibelco contributed €4,865,810 in cash and has committed to advance a further €30,000,000 in tranches to fund the development of SRL's mineral projects, including facilities and related infrastructure. The initial participating interests of Sibelco and Avalon in the Joint Venture Company is 60% and 40%, respectively.

The 2023 Debenture bears interest at 7.115% per annum and the principal and interest are payable on maturity, being June 14, 2025. To the extent not repaid at Maturity by the Company, Sibelco will have the right to convert the 2023 Debenture into either an aggregate of 37,590,496 Common Shares, or an additional 5% interest in the Joint Venture Company, in which case the participating interests of Sibelco and Avalon will change to 65% and 35%, respectively. The 2023 Debenture is secured by a pledge of Avalon's shares of SRL.

Subsequent to the end of the Fiscal Year, the Company Completed $3,500,000 in debenture financing with Sibelco. Sibelco provided an additional funding of $3,500,000 to the Company by way of an amended and restated debenture (the "2024 Debenture"). The 2024 Debenture replaced the 2023 Debenture and have a principal amount of $6,500,000. The 2024 Debenture bears interest at 7.5% per annum, with the principal and accrued interest payable on maturity, being November 18, 2026.

Should the 2024 Debenture not be repaid by the Company at maturity, Sibelco has the right to (a) convert the outstanding principal and accrued interest into additional common shares of Avalon at a price equal to the greater of (i) the 15 day VWAP of the Company's common shares on the TSX immediately prior to the exercise of this right and (ii) the minimum price allowed by the TSX or (b) convert the outstanding principal and interest into additional common shares of SRL, based on a pro-rated formula.

If the entire amount of the 2024 Debenture and accrued interest is converted to common shares of SRL at maturity, then Sibelco's equity interest in SRL will be increased by 30% to 90%, with the Company owning the remaining 10%. Sibelco will also have the right to exercise its conversion rights prior to maturity if the Company does not make certain reductions in its corporate and administrative costs. The 2024 Debenture continues to be secured by a pledge of Company's shares in SRL.

During the Fiscal Year the Company entered into an up to $15,000,000 convertible security agreement (the "Funding Agreement") with an entity managed by The Lind Partners ("Lind") and completed the first drawdown and issued a convertible note payable of $2,750,000 to Lind. Subject to further agreement by the parties, an additional drawdown under the Funding Agreement can be made on satisfaction of certain conditions.

The convertible security issued pursuant to the first drawdown under the Funding Agreement has a two-year term and accrues a simple interest rate obligation of 10% per annum on the funded amount, which is prepaid and attributed to the face value of the convertible note payable upon issuance, resulting in a face value of $3,300,000 (the "Face Value"). Lind is entitled to convert the Face Value amount over a 24-month period, subject to certain limits, at a conversion price equal to 85% of the five-day trailing volume weighted average price of Avalon's common shares prior to the date of conversion. The convertible security matures on March 27, 2026. Commencing on August 26, 2024, the Company has the right to repurchase the convertible security, subject to Lind's option to convert up to one third of the Face Value into Avalon common shares prior to such repurchase. The

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convertible note payable is secured by a general security agreement and a mortgage on the Company's Thunder Bay Property.

In conjunction with the closing of the first drawdown under the Funding Agreement, the Company paid Lind a closing fee of $96,250, and issued 15,800,000 common share purchase warrants to Lind. Each warrant entitles Lind to purchase one common share of the Company at a price of $0.13 per common share until March 27, 2029.

As at August 31, 2024, the Company has current assets of $891,810 and current liabilities of $4,873,887. The Company's working capital deficit was $3,982,077 as at August 31, 2024 (August 31, 2023 - working capital of $1,728,081).

The Company's operating expenditures, excluding expenditures on property work programs, currently average approximately $260,000 per month. The Company's contemplated capital, resource property and other project expenditures for Fiscal 2024, assuming the requisite financing is in place, and excluding capitalized salaries and benefits, are budgeted at approximately $7,300,000.

The Company will need to raise additional capital to fund the development of its planned midstream lithium-hydroxide processing facility. Any significant new work programs for fiscal year ending August 31, 2025 on the Separation Rapids Lithium and Lilypad Cesium-Tantalum Projects are expected to be funded by Sibelco's cash contribution to the joint venture. Initiatives to raise additional capital are ongoing and include financing from investing partners for developing the lithium-hydroxide processing facility. There continues to be increasing investor interest in critical minerals for clean technology creating many new opportunities to access capital including from the growing ESG investment community. Having the new ESG risk rating will improve access to ESG oriented risk capital including Green Bonds. Discussions with potential joint venture partners to provide project financing are also ongoing and the Company is continuing to prioritize financing opportunities that will minimize the potential for excessive shareholder dilution. The Company's expenditures on discretionary exploration and development activities have some scope for flexibility in terms of amount and timing, which can be adjusted accordingly.

The Company does not have any externally imposed capital requirements other than those certain Events of Default contained in the 2023 and 2024 Debenture terms. The Company continues to work on attracting more substantial project financing through the participation of one or more strategic partners, a long term construction debt financing facility, and/or through the equity markets. If the Company is not able to secure financing on satisfactory terms, expenditures on the development of its projects will need to be delayed. However, given the extensive governmental and market interest in establishing new lithium battery materials supply chains, management is of the view that it is a matter of when adequate financing is secured, not if.

All of the Company's resource properties are owned, leased or licenced with minimal holding costs. The most significant holding costs being annual lease rental fees on Nechalacho of $24,841 (which are shared 50/50 with Cheetah) and the annual expenditure related to the mining lease at Warren Township is $2,063

The Company has a lease for its premises. As at the date of this MDA, the minimum lease commitments under this lease are as follows:

Fiscal year ending August 31,	2025	$133,398
	2026	$240,942
	2027	$245,358
	2028	$249,846
	2029	$ 56,926

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Off Balance Sheet Arrangements

As at August 31, 2024, the Company had no material off balance sheet arrangements such as guaranteed contracts, contingent interests in assets transferred to an entity, derivative instrument obligations or any instruments that could trigger financing, market or credit risk to the Company.

Transactions with Related Parties

Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed here. Details of the transactions between the Company and other related parties are disclosed below:

a) Trading transactions

There have been no material trading transactions with related parties during each of the years ended August 31, 2024 and 2023, other than the participation by certain related parties in the January 2024 private placement whereby Mr. Jan Holland, former Executive Chair of the Board of Directors and a person related to Mr. Holland subscribed for a total of 1,150,000 Units at $0.10 per Unit. Each unit was comprised of one common share and one half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of $0.15 for a period of three years until January 31, 2027, or if the closing price of the common shares on the TSX is $0.30 or higher for a period of twenty consecutive trading days after the January 31, 2024, the Company may, by notice to the holder (supplemented by a news release of general dissemination) reduce the expiry date of the warrants to not less than 30 days from the date of such notice.

b) Compensation of key management personnel

The remuneration of directors and other key members of the Company's senior management team during the years ended August 31, 2024 and August 31, 2023 are as follows:

	August 31, 2024	August 31, 2023
Salaries, benefits and directors' fees (1)	$ 2,486,695	$ 1,308,320
Share based compensation (2)	401,823	530,299
	$ 2,888,518	$ 1,838,619

(1) Salaries and benefits of key management personnel capitalized to exploration and evaluation assets and PPE totaled $115,681 (2023 - $116,030).
(2) Fair value of stock options, DSUs & RSUs earned and recognized as share based compensation during the respective reporting period.

Subsequent Events

Subsequent to the end of the Fiscal Year, the Company:

a) Completed $3,500,000 in debenture financing with Sibelco. Sibelco provided an additional funding of $3,500,000 to the Company by way of the 2024 Debenture. The 2024 Debenture replaced the 2023 Debenture and have a principal amount of $6,500,000. The 2024 Debenture bears interest at 7.5% per annum, with the principal and accrued interest payable on maturity, being November 18, 2026.

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b) Issued 3,500,000 common share purchase warrants to Lind in connection with the issuance of the 2024 Debenture, and in consideration for Lind to waive certain conditions of the 2024 Note. Each warrant entitles Lind to purchase one common share of the Company at a price of $0.0625 per common share until November 18, 2029;

c) issued 11,764,933 common shares pursuant to the conversion of $495,000 of the note payable;

d) completed a private placement and issued 6,400,000 units at a price of $0.05 per unit (the "New Unit") for gross proceeds of $320,000 (the "October 2024 Private Placement"), of which 200,000 New Units were subscribed by Mr. Zeeshan Syed, President of the Company and 200,000 New Units were subscribed by Mr. Andrew Ramcharan, Vice President - Corporate Development of the Company. Each unit was comprised of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of $0.075 for a period of three years after closing, or if the closing price of the common shares on the TSX is $0.15 or higher for a period of twenty consecutive trading days after the closing date, the Company may, by notice to the holder (supplemented by a news release of general dissemination) reduce the expiry date of the warrants to not less than 30 days from the date of such notice;

e) granted an aggregate of 625,000 stock options with a weighted average exercise price of $0.06 per share to certain directors and consultants of the Company. The weighted average contract life of these options at issuance was 2.4 years;

f) issued 60,000 common shares to a former director pursuance to the redemption of 125,000 DSUs; and

g) had 225,000 options with an exercise price of $0.05 per share expire.

Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, receivables, accounts payable and accrued liabilities, debenture payable, convertible note payable and warrants with exercise prices that are subject to adjustment from time to time.

Management does not believe these financial instruments expose the Company to any significant interest, currency or credit risks arising from these financial instruments. The fair market values of cash and cash equivalents, receivables, accounts payable and accrued liabilities, debenture payable and convertible notes payable approximate their carrying values.

Interest income from cash and cash equivalents are recorded in the statement of comprehensive loss.

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Outstanding Share Data

The Company's share capital structure including its common shares and any potentially dilutive instruments outstanding as at the date of this MDA are as follows:

Common shares	590,014,988
Warrants	48,860,312
Stock options	23,633,750
DSUs	1,395,000
RSUs	3,304,013
Convertible note payable (1)	55,122,494
Total	722,330,557

(1) The number of common shares would be issued if the full amount of note payable of $2,475,000 outstanding as at the date of this MDA had been converted into common shares using the 5 Day VWAP of the Company's common shares on the TSX of $0.0528 on August 31, 2024.

The Company would be required to issue 144,077,305 common shares (using the 15 Day VWAP of the Company's common shares on the TSX of $0.0540 on August 31, 2024) to Sibelco if the Company fails to repay the principal and accrued interest of $7,780,175 of the 2024 Debenture at maturity and Sibelco chooses to convert the 2024 Debenture into common shares of the Company. The Company is also committed to issue 20,000 warrants to the Northwest Territory Métis Nation in two equal installments of 10,000 warrants upon the Nechalacho REE Project meeting certain milestones.

a) Common and Preferred Shares

The Company is presently authorized to issue an unlimited number of common shares without par value. The Company is also authorized to issue up to 25,000,000 preferred shares without par value, of which 950 have been issued and none is outstanding as at August 31, 2024.

As at August 31, 2024, the Company has 571,790,055 common shares issued and outstanding. Subsequent to the end of the Fiscal Year, and as described earlier under "Subsequent Events", a total of 18,224,933 shares were issued. As of the date of this MDA, the Company has 590,014,988 common shares outstanding.

b) Options

As at August 31, 2024, the Company had an aggregate 23,233,750 incentive stock options outstanding with a weighted average exercise price of $0.13 (of which 11,816,250 were vested and 11,417,500 were unvested). Subsequent to the end of the Fiscal Year, 625,000 stock options were granted, and 225,000 stock options expired (as described earlier under "Subsequent Events"). As at the date of this MDA, the Company has 23,633,750 incentive stock options with a weighted average exercise price of $0.12 outstanding.

c) Deferred and Restricted Share Units

As at August 31, 2024, the Company had 1,520,000 fully vested DSUs outstanding. Subsequent to the end of the Fiscal Year, 125,000 DSUs were redeemed (as described earlier under "Subsequent Events"). As the date of this MDA, the Company has 1,395,000 fully vested DSUs outstanding.

As at August 31, 2024, and as of the date of this MDA, the Company has 3,304,013 fully vested RSUs outstanding.

d) Warrants

As at August 31, 2024 the Company has the following common share purchase warrants outstanding:

i. 9,800,000 warrants with an exercise price of $0.18 per common share which are exercisable until January 29, 2025;
ii. 3,529,412 warrants with an exercise price of $0.25 per common share which are exercisable until December 2, 2024;
iii. 2,205,900 warrants with an exercise price of $0.25 per common share which are exercisable until December 14, 2024; and
iv. 9,000,000 warrants with an exercise price of $0.26 per common share and are exercisable until May 9, 2026.
v. 2,125,000 warrants with an exercise price of $0.15 per common share which are exercisable until January 31, 2027, or, if at any time following January 31, 2024, the closing price of the common shares on the TSX is $0.30 or higher for a period of twenty consecutive trading days, the Company may, by notice to the holder (supplemented by a news release of general dissemination) reduce the expiry date to not less than thirty days from the date of such notice; and
vi. 15,800,000 warrants with an exercise price of $0.13 per common share and are exercisable until March 27, 2029,

Subsequent to the end of the Fiscal Year, the Company issued the following warrants (as described earlier under "Subsequent Events"):

i. issued 6,400,000 warrants in connection with the October 2024 Private Placement with an exercise price of $0.075 per common share which are exercisable until October 25, 2027, or, if at any time following October 25, 2024, the closing price of the common shares on the TSX is $0.15 or higher for a period of twenty consecutive trading days, the Company may, by notice to the holder (supplemented by a news release of general dissemination) reduce the expiry date to not less than thirty days from the date of such notice;
ii. issued 3,500,000 common share purchase warrants to Lind in connection with the issuance of the 2024 Debenture, and in consideration for Lind to waive certain conditions of the 2024 Note. Each warrant entitles Lind to purchase one common share of the Company at a price of $0.0625 per common share until November 18, 2029.

The Company is also committed to issue 20,000 warrants to the NWTMN in two equal installments of 10,000 warrants upon the Nechalacho Project meeting certain milestones. These warrants will have a contractual term of five years and will have an exercise price based on the then current market price of the Company's common shares at the date of issue of the warrants.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to permit timely decisions regarding public disclosure.

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Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as of August 31, 2024. Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are designed effectively to provide reasonable assurance that the information required to be disclosed in annual filings, interim filings, or other reports filed or submitted under Canadian securities legislation, processed, summarized and reported within the time period specified in those rules.

During the process of review and evaluation, it was determined that the Company's disclosure controls and procedures are operating effectively as at August 31, 2024.

Internal Control over Financial Reporting

The CEO and CFO are also responsible for the design of the Company's internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting Standards. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements.

Under the supervision, and with the participation, of the CEO and CFO, management conducted an evaluation of the effectiveness of the Company's ICFR based on the framework Internal Control - Integrated Framework (COSO 2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the CEO and CFO have concluded that the design and operation of the Company's ICFR were effective as at August 31, 2024. No material weaknesses were identified by management during this evaluation.

There have been no changes to the Company's design of internal controls over financial reporting that occurred during the Quarter that materially affected, or are reasonably likely to affect, the Company's ICFR.

Critical Accounting Judgments and Estimation Uncertainties

The preparation of the consolidated financial statements in conformity with IFRS Accounting Standards requires that the Company's management make critical judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the related notes thereto. Actual results may differ from those estimates. Estimates and assumptions are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates are accounted for prospectively.

The Company has identified the following significant areas where critical accounting judgments, estimates and assumptions are made and where actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

Further details of the nature of these assumptions and conditions may be found in the relevant notes to the consolidated financial statements.

Key Sources of Estimation Uncertainty

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the financial results or the financial positions reported in future periods are included in the following notes:

Recoverability of Exploration and Evaluation Assets, Investment in Associate and Property, Plant and Equipment

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The Company assesses its long-lived assets, specifically all exploration and evaluation assets, its investment in associate and property, plant and equipment ("PPE") at each reporting date to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is the higher of the fair value less costs of disposal and value in use. These assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, foreign exchange rates, years to commencement of production, future capital requirements, exploration potential and operating performance.

Determination of Reserve and Resource Estimates

Mineral reserves and resources are estimates of the amount of ore that can be economically and legally extracted from the Company's exploration and development properties. The estimation of recoverable reserves for non-traditional mineral commodities, like lithium and rare earths, is based primarily upon demand for the product as well as estimates of commodity prices, production costs, production techniques, future capital requirements and foreign exchange rates, along with geological assumptions and judgments made in estimating the size and quality of the resource. Changes in the resource estimates may impact the carrying value of exploration and evaluation assets, development assets, PPE, site closure plans as well as the scale of the operations.

Fair Value of Share Based Payments and Warrants

The Company follows IFRS 2, Share based Payment, in determining the fair value of share-based payments. This calculated amount is not based on historical cost, but is derived based on assumptions (such as the expected volatility of the price of the underlying security, expected hold period before exercise, dividend yield and the risk-free rate of return) input into a pricing model. The model requires that management make forecasts as to future events, including estimates of: the average future hold period of issued stock options and compensation warrants before exercise, expiry or cancellation; future volatility of the Company's share price in the expected hold period; dividend yield; and the appropriate risk-free rate of interest. The resulting value calculated is not necessarily the value that the holder of the option or warrant could receive in an arm's length transaction, given that there is no market for the options or compensation warrants and they are not transferable. Similar calculations are made in estimating the fair value of the warrant component of an equity unit. The assumptions used in these calculations are inherently uncertain. Changes in these assumptions could materially affect the related fair value estimates.

Gain on Sale of Exploration and Evaluation of Assets

The Company estimated the fair value of the gain on the sale/transfer of the Separation Rapids and Lilypad Projects to SRL as described in note 5 of the accompanying audited consolidated financial statements.

The estimation of the gain is based on the estimated fair value of Sibelco's cash contributions to SRL to acquire the 60% interest in SRL, which requires the estimate and assumptions of the timing of Sibelco's cash contributions, discount rate and the future foreign exchange rate of the Euro to the Canadian Dollar.

Critical Judgments

Information about critical judgments in applying accounting policies that have most significant effect on the consolidated financial statements are as follows:

Capitalization of Exploration and Evaluation Costs

Exploration and evaluation costs incurred during the year are recorded at cost. Capitalized costs include costs directly attributable to exploration and evaluation activities, including salaries and benefits of employees who are directly engaged in the exploration and evaluation activities. Administrative and other overhead costs are expensed. Exploration and evaluation costs incurred that have been determined to have future economic benefits and can be economically recoverable

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are capitalized. In making this judgment, management assesses various sources of information including, but not limited to the geologic and metallurgic information, history of conversion of mineral deposits to proven and probable mineral reserves, scoping and feasibility studies, proximity of operating facilities, operating management expertise and existing permits.

Changes in Accounting Policies Including Initial Adoption

A number of amendments to existing standards became effective September 1, 2023 for the Company but they did not have a significant impact on the Company's financial statements.

Recent Accounting Pronouncements

The following pronouncements are issued but not yet and have not been applied in preparing the Company's consolidated financial statements. Management believes that other new IFRS accounting pronouncements not yet effective do not have a significant impact on the Company's present or near future consolidated financial statements.

Amendments to IAS 1 - Presentation of Financial Statements - Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements to clarify the requirements for classifying liabilities as current or non-current.

The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists and clarify the situations that are considered settlement of a liability, which include settlement by transferring a company's own equity instruments to the counterparty. The amendments further clarify how an entity classifies a liability that includes a counterparty conversion option, and that when classifying liabilities as current or non-current - an entity can ignore only those conversion options that are recognized as equity.

The amendments will become effective for annual reporting periods beginning on or after January 1, 2024 (which will become effective on September 1, 2024 for the Company), and will apply retrospectively. With application of these amendments, the Company's convertible note payable and derivative liabilities currently classified as non-current liability will be classified as current liability.

IFRS 18 - Presentation and Disclosure in the Financial Statements

In April 2024, the IASB issued IFRS 18, Presentation and Disclosure of Financial Statements ("IFRS 18"). IFRS 18 is effective for periods beginning on or after January 1, 2027 (which will become effective on September 1, 2027 for the Company) and will apply retrospectively. IFRS 18 will replace IAS 1. IFRS 18 is expected to improve the quality of financial reporting by requiring defined subtotals in the statement of profit or loss, requiring disclosure about management-defined performance measures, and adding new principles for aggregation and disaggregation of information. The Company has not yet determined the impact of this standard on its disclosures.

Forward-Looking Information, Risk Factors and Qualified Persons

Certain of the statements that are not historical facts contained in this MDA are forward-looking information and forward-looking statements that involve risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in the forward-looking statements. Such forward-looking statements reflect the Company's current views with respect to future events and include, among other things, statements regarding targets, estimates and/or assumptions in respect of reserves and/or resources, and are based on estimates and/or assumptions related to future economic, market and other conditions that, while considered reasonable by management, are inherently subject to risks and uncertainties, including significant

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business, economic, competitive, political and social uncertainties and contingencies. These estimates and/or assumptions include, but are not limited to:

grade of ore;
mineral product and commodity prices;
metallurgical recoveries;
operating costs;
achievement of current timetables for development;
strength of the global economy;
availability of additional capital;
availability of supplies, equipment and labour; and
market and sector trends.

Factors that could cause the Company's actual results, performance, achievements, developments or events to differ materially from those expressed or implied by forward-looking statements include, among others, the factors described or referred to under "Description of the Business - Risk Factors" in the Company's Annual Information Form for the year ended August 31, 2024, and:

risks related to the Company's history of losses, lack of operating history, ability to generate material revenues and continue as a going concern;
risks related to the Company's joint venture with Sibelco, including dilution and control risks;
risks related to establishing new operations in the event that the Company elects to proceed with the development of one of its projects;
risks related to the Company's need for additional financing;
risks related to any joint venture or strategic alliances that may be entered into by the Company;
risks related to either Avalon's or Cheetah's development plans of the Nechalacho Project negatively impacting the other's development plans;
risks related to securing product off-take agreements on a timely basis;
risks related to the unique ore type at the Nechalacho Project and for which known metallurgical processes have not previously been applied;
uncertainty related to title to the Company's properties as well as the risk of delays in obtaining licenses and permits as a result of local opposition, including uncertainty related to any challenges in connection with Indigenous land title claims and Indigenous rights;
risks related to the possible existence of rights and interests of Indigenous groups, which may limit the Company's ability to develop its properties;
risks related to the need to acquire properties for the hydrometallurgical plant and potentially a rare earth refinery for the Nechalacho Project;
risks that actual capital costs, production schedules and economic returns for the Nechalacho Project may differ significantly from those anticipated by the Company;
risks related to the demand for technology metals and minerals and fluctuations in their pricing;
risks related to the demand for lithium and fluctuations in its pricing;
risks related to competition and the actions of competitors;
risks related to costs or delays in the commercialization of rare earth products;
uncertainties related to the fact that the Company's mineral resources and mineral reserves are only estimates;
risks related to obtaining, maintaining and renewing licenses and permits, and the material costs, liabilities and obligations in connection therewith;
risks that the Company will be subject to material costs, liabilities and obligations in connection with environmental laws, regulations and approvals and that approvals will not be available;
uncertainties involving uninsured risks;
risks related to possible shortages of supplies, equipment and labour;
risks related to the Company's ability to attract and retain qualified management and technical personnel;

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uncertainty whether the Company will acquire commercially mineable ore deposits or whether the current mineral deposits identified by the Company can be developed as commercially viable ore bodies;
risks inherent to the competitive nature of the mineral industry;
risks related to the extensive federal, state, provincial, territorial and local laws and regulations to which the Company's activities are subject;
risks related to the availability and reliability of adequate infrastructure;
risks and hazards inherent to the mining industry;
risks related to any changes in critical accounting estimates that adversely affect the Company's financial results;
risks related to potential conflicts of interest of the Company's directors and officers who may have involvement with other resource companies;
risks related to cybersecurity;
risks due to being a "passive foreign investment company" for U.S. purposes;
risks related to fluctuations of currency exchange rates;
risks related to share price volatility;
risks related to dilution of existing shareholders;
risks related to not paying cash dividends;
risks related to international conflicts;
risks related to global financial conditions; and
risks related to there being no market for the Company's warrants.

Most of the foregoing factors are beyond the Company's ability to control or predict. Although the Company has attempted to identify important factors that could cause actual results, performance, achievements, developments or events to differ materially from those described in forward-looking statements, there may be other factors that cause actual results, performance, achievements, developments or events not to be as anticipated, estimated or intended. There can be no assurance that the estimates and/or assumptions upon which these forward-looking statements are based will occur.

Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur.

The forward-looking statements contained herein are made as of the date of this MDA and are expressly qualified in their entirety by this cautionary statement. Readers should not place undue reliance on the forward-looking statements, which reflect management's plans, estimates, projections and views only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances, except as required by applicable law.

The technical information included in this MDA, unless otherwise stated, has been reviewed and approved by Rickardo Welyhorsky, P. Eng., Vice-President, Operations and Chief Operating Officer of the Company. Mr. Welyhorsky is a qualified person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101").

Cautionary Note to U.S. Persons

This MDA was prepared in accordance with Canadian standards for reporting of mineral resource estimates, which differ in some respects from United States standards. In particular, and without limiting the generality of the foregoing, the terms "mineral resources," "inferred mineral resources," "indicated mineral resources," "measured mineral resources," "mineral reserves," "proven mineral reserves," and "probable mineral reserves" used or referenced in this MDA are Canadian mineral disclosure terms as defined in accordance with NI 43-101 under the guidelines set out in the CIM Standards. These definitions differ from the definitions in Subpart 1300 of Regulation S-K ("Subpart 1300"), based on the Committee for Mineral Reserves International Reporting Standards ("CRIRSCO"), which replaced the United States Securities and Exchange Commission's (the "SEC")

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Industry Guide 7 as part of the SEC's amendments to its disclosure rules to modernize the mineral property disclosure requirements. These amendments became effective February 25, 2019 and registrants were required to comply with the Subpart 1300 provisions by their first fiscal year beginning on or after January 1, 2021. Readers are cautioned not to assume that all or any part of mineral reserves and mineral resources determined in accordance with NI 43-101 and CIM Standards will qualify as, or be identical to, mineral reserves and mineral resources estimated under the standards of the SEC applicable to U.S. companies under Subpart 1300. While the definitions in Subpart 1300 are more similar to the definitions in NI 43-101 and the definitions in the CIM Standards than were the Industry Guide 7 provisions due to the adoption in Subpart 1300 of terms describing mineral reserves and mineral resources that are "substantially similar" to the corresponding terms under the definitions in the CIM Standards, including the SEC now recognizing estimates of "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" and amending its definitions of "proven mineral reserves" and "probable mineral reserves" to be "substantially similar" to the corresponding definitions under the CIM Standards that are required under NI 43-101, the definitions in Subpart 1300 still differ from the requirements of, and the definitions in, NI 43-101 and the CIM Standards. Investors are cautioned that while the above terms are "substantially similar" to the corresponding definitions in the CIM Standards, there are differences in the definitions in Subpart 1300 and the CIM Standards. Accordingly, there is no assurance any mineral resources or mineral reserves that the Company may report as "inferred mineral resources," "indicated mineral resources," "measured mineral resources," "proven mineral reserves," and "probable mineral reserves" under NI 43-101 would be the same had the Company prepared the mineral resource or mineral reserve estimates under the standards adopted under the standards of the SEC applicable to U.S. domestic companies under Subpart 1300. Investors are also cautioned that while the SEC recognizes "inferred mineral resources," "indicated mineral resources," and "measured mineral resources" under Subpart 1300, investors should not assume that any part or all of the mineralization in these categories will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralization described using these terms has a great amount of uncertainty as to its existence, and great uncertainty as to its economic feasibility than mineralization that has been characterized as reserves. Accordingly, investors are cautioned not to assume that any measured mineral resources, indicated mineral resources, or inferred mineral resources that the Company reports are or will be economically or legally mineable. Under Canadian rules, estimates of "inferred mineral resources" may not form the basis of feasibility or other economic studies, except in limited circumstances. Readers are also cautioned not to assume that all or any part of an inferred mineral resource exists. The term "resource" does not equate to the term "reserves". Accordingly, information contained herein containing descriptions of the Company's mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

Other Information

Additional information on the Company is available on SEDAR at www.sedarplus.com and on the Company's website at www.avalonadvancedmaterials.com.

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AI assistant

Avalon Advanced Materials Inc. — Management Reports 2024

43966_rns_2024-11-28_a3d29124-f871-4cf8-9797-1dcbd2286fea.pdf

Avalon Advanced Materials Inc.

Management's Discussion and Analysis of Financial Statements for the year ended August 31, 2024

Land Acknowledgement

Nature of Business and Overall Performance

Strategic Partnership with SCR-Sibelco NV

Overview of Transactions

Strategic Financing

Joint Venture

Lake Superior Lithium Project

Resource Development Activities

Separation Rapids Lithium Project

East Kemptville Tin-Indium Project

Warren Township Anorthosite Project

Corporate Social Responsibility

Selected Annual Information

Administration and Other

Summary of Quarterly Results

Liquidity and Capital Resources

Off Balance Sheet Arrangements

Transactions with Related Parties

Subsequent Events

Financial Instruments

Outstanding Share Data

a) Common and Preferred Shares

b) Options

c) Deferred and Restricted Share Units

Internal Control over Financial Reporting

Critical Accounting Judgments and Estimation Uncertainties

Key Sources of Estimation Uncertainty

Determination of Reserve and Resource Estimates

Fair Value of Share Based Payments and Warrants

Gain on Sale of Exploration and Evaluation of Assets

Critical Judgments

Capitalization of Exploration and Evaluation Costs

Changes in Accounting Policies Including Initial Adoption

Recent Accounting Pronouncements

Forward-Looking Information, Risk Factors and Qualified Persons

Cautionary Note to U.S. Persons

Other Information

More from Avalon Advanced Materials Inc.

Avalon Advanced Materials Inc. Management Reports 2024