Corporate PresentationA 17 2011August 17, 2011

Don Bubar, President & CEO

Safe Harbour StatementSafe Harbour Statement

Forward looking information g

Certain statements contained in or incorporated by reference into thispresentation constitute forward-looking statements. Such statementsreflect the current views of Avalon Rare Metals Inc with respect to futurereflect the current views of Avalon Rare Metals Inc. with respect to futureevents and are subject to certain risks, uncertainties and assumptions.Many factors could cause the actual results, performance or achievementsof Avalon Rare Metals Inc. that may be expressed or implied by suchof Avalon Rare Metals Inc. that may be expressed or implied by suchforward-looking statements to vary from those described herein shouldone or more of these risks or uncertainties materialize. Avalon Rare MetalsInc. does not intend, and does not assume any obligation, to update thesey g pforward-looking statements.

2

Capital StructureAugust 8, 2011

Canada - TSX: AVLCanada TSX: AVL

United States – NYSE Amex: AVL Frankfurt- OU5

Shares Outstanding 102,572,615

Fully Diluted 113 048 970Fully Diluted 113,048,970

Market Capitalization US $538 million (S/O @ $5.25)

Recent Price Range US $4.00 - $6.50

52 Week High / Low US $10.11 – C $2.53

Cash Reserves C $72 million (No debt)

Insider Share Position 4.1 million shares (4.5%) ( )

Institutional holdings John Hancock, TDAM, Global X, Manulife, AGF

(est. 30-40%) Encompass, Van Eck, Cantara, Sentry, Chilton

Employees 25 (including contract staff)

3

Employees 25 (including contract staff)

1 Year Price Chart

China reduces export quotas

CIBC Financing

NYSE Amex Listing

CIBC Financing

Rising REE PricesRising REE Prices

4

Dysprosium, Neodymium, and Lanthanum: Inside and Lanthanum: Inside China price trends

Updated June 7 2011Updated June 7, 2011

5

Rare Earth Element PricesRare Earth Element Prices

Source: Metal-Pages.com, August 16, 2011 (US$/kg)Prices are indicative and basis FOB China

Metal Oxide Principal Uses Current Prices Oct . 09 Prices

Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 129.00 – 131.00 4.40 – 4.90

Cerium Oxide 99% min Catalyst, glass, polishing 119.00 – 121.00 3.50 – 4.00

Praseodymium Oxide 99% min Magnets, glass colorant 247.00 – 250.00 14.20 – 14.70

Neodymium Oxide 99% min Magnets, lasers, glass 335.00 – 340.00 14.70 – 15.20

Samarium Oxide 99% min Magnets, lighting, lasers 127.00 – 130.00 4.25 – 4.75

Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 5460.00 – 5480.00 470.00 – 490.00

Terbium Oxide 99% min Phosphors: green, magnets 4200.00 – 4220.00 340.00 – 360.00

Dysprosium Oxide 99% min Magnets, lasers 2380.00 – 2400.00 105.00 – 110.00

Gadolinium Oxide 99%min Magnets, superconductors 200.00 – 205.00 5.00 – 5.50

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Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 180.00 – 185.00 10.00 – 10.50

Management & Board of DirectorsDirectors

ManagementD ld S B b P G

Charlotte May, Assistant SecretaryCindy Hu CA CPA CGA ControllerDonald S. Bubar, P.Geo,

President, CEO & Director

Jim Andersen, C.A., C.P.A., V P Finance & CFO Directors

Cindy Hu, CA, CPA, CGA, ControllerRon Malashewski, P.Eng (AB), Manager, Investor Relations

V.P. Finance & CFO

Bill Mercer, Ph.D., P.Geo., V.P. Exploration

David Swisher B S Min Eng

DirectorsAlan Ferry, CFANon-Executive Chairman

David Connelly CStJ CD MBA David Swisher, B.S. Min.Eng.,

V.P. Operations

Pierre Neatby, B.A. Econ, V.P. Sales & Mktg

David Connelly, CStJ, CD, MBA, B.Comm

Phil Fontaine, B.A., LL.D.

Brian D. MacEachen, C.A. V.P. Sales & Mktg

Brian Chandler, P.Eng. Senior VP & COO (starting August 15)

Richard Pratt, V.P., General Counsel

, Audit Committee Chair

Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation ctte

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Richard Pratt, V.P., General Counsel and Corporate Secretary (August) Hari Panday, C.A.

Each REE deposit has its ownunique, (constant) distributionq , ( )

Avalon’s Nechalacho deposit is rich in HREE and a more sustainable alternative to the South China ionic clays sustainable alternative to the South China ionic clays

90%

100%

60%

70%

80%

90%

30%

40%

50%

0%

10%

20%

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Mt PassMolycorp

Baiyun Obo Baotou

Mt WeldLynas

NolansArafura

NechalachoAvalon

Project LocationsProject LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumNiobiumZirconiumHafniumGallium

NORTH T DEPOSITNORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium

Avalon offers diversified diversified exposure to a broad range

f l

All projects 100% owned

of rare metals

9

j

Key Applications of REE:M t f El t i M tMagnets for Electric Motors

REE (NdFeB) or “Neo” Magnets reduce electric motor/generator size and weight, and improve efficiency

Major applications include:Electronics (grams)H b id l t i (1 2 k )

100 Kw generator with neo magnets

Hybrid-electric cars (1-2 kg)Industrial air conditioners (500 kg)Wind turbines (0.6-1.0 tonne/MW)MRI machines (1-3 tonnes) ( )

Trend toward larger volume applicationsREE magnets can reduce power consumption by 50% Approximately 30% of the magnet is Neodymium metalpp y g y

HREE dysprosium and terbium additions are key to making “heat resistant” magnets vital to automotive and other applicationsHREE phosphors key to energy efficient lighting display screens

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HREE phosphors key to energy efficient lighting, display screens

Forecast for Global Demand and Supply in 2015 (+/- 20%)and Supply in 2015 (+/ 20%)

Demand (tonnes REO)

Excess / Shortage Supply (tonnes REO)

Data source: IMCOA, (Dudley Kingsnorth) February ,2011.

Based on total REO d d f 185 000 demand of 185,000 tonnes and an adjusted supply of 198,500 tonnes.

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Recent Developments in REE M k tMarkets

China increases second half 2011 quotas by 8.9% (from the first half 2011 quotas) for a total of 15,738 tonnes

In the past 4 months Individual REE oxide prices have risen dramatically outside China and inside China as well

Molycorp signs MOU with Sumitomo for $130 million debt / equity financing, and enters magnet alloy joint venture with Hitachi Metals

Lynas and Sojitz Corporation announce Strategic Alliance to supply Japanese market and $275 million financing facility to expand production to 22,000 tpa TREO by 2013

Molycorp announces expansion plans to 40,000 tpa TREO , the acquisition of AS SilmetREE plant in Estonia and Santoku America REE metal alloy plant in Arizona

Siemens and Lynas sign a letter of intent for future magnet production

Avalon signs MOU’s about off-take and investment with 3 Asian industrials

Frontier Resources and Korean Resources Corporation sign strategic partnership

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Rare Earth Element Supply Chain

REE MiningFrom the ground to

REE MillingGrinding and Beneficiation

REE Hydrometallurgy

C ki th REE i l From the ground to crushed ore

Grinding and Beneficiation of REE minerals

Cracking the REE minerals to produce mixed REE oxides concentrate

REE SeparationREE RefiningTo meet specific

REE ProductsPermanent magnets

Separating and purifying the individual REE oxides

To meet specific downstream technology applications

Permanent magnets, LED’s , consumer electronics

Avalon’s contributions to the REE supply chain...Three large plants with a

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Three large plants with a total CAPEX of > $1billion

Thor Lake: Project LocationThor Lake: Project Location

Flotation plant t Th l k at Thor lake,

shipping of concentrate by b t barge to hydromet plant at Pine Point.

Concentrates shipped by rail from Hay River from Hay River to Separation Plant

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Nechalacho REE Deposit at Th L k K F tThor Lake: Key Facts

Positive pre-feasibility study completed in 2010. >C$30 million invested since 2005 incl 59 000m of drilling in 266 holesinvested since 2005, incl. 59,000m of drilling in 266 holes$46 million Bankable feasibility underway, funded, complete in 2012Large resource amenable to low cost underground mining methodsRi h i h h (20 28%) Hi h d b d fi dRich in heavy rare earths (20-28%), High grade subzones definedExtractive process defined at bench scale. Pilot plant in progressProduct marketing: 3 MOU’s signed with potential strategic partnersBy-product revenues from zirconium, niobium and tantalum

Environmental assessment and permitting process in progress with First Nations supportprocess in progress with First Nations supportPlanning for N. American HREE separation plant Start-up in 2015, sales in 2016

$

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C$1.0-1.2 billion estimated total capital cost

West Long Lake Area

Tardiff Lakes Area

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Nechalacho REE Deposit C t l D l t PlConceptual Development Plan

Barren Rock D mp

VentMine Portal

Barren Rock Dump

Tailings PondLong Lake

Underground MiningUpper Zone

g g

Basal Zone

Tailings Storage

Mining underground room & pillar/long-hole stopingg g p g p g2,000 tonnes per day (tpd), (lower rate during start-up)

Flotation processing to produce mineral concentrate Hydrometallurgical treatment of mineral con in plant south of GSLHydrometallurgical treatment of mineral con in plant south of GSLProduction of 10,000 tpa mixed REE oxides for separation elsewhereMarket capture less than 5% of est. 2014 TREO global demand Operating Costs: $267/mined tonne of ore inclusive mine mill and

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Operating Costs: $267/mined tonne of ore inclusive mine, mill and hydromet or $6.50 -$7.00/kg REO after separation

2011 Updated RPA Prefeasibility Study: Summary of Financial AnalysisSummary of Financial Analysis

Financial Analysis

Original PFS Updated PFS

P T (CAD$) After-Tax P T (CAD$) After-Tax Pre-Tax (CAD$) (CAD$) Pre-Tax (CAD$)

(CAD$)

Internal Rate of Return 14% 12% 39% 34%

Net Cash Flow $2.1 billion $1.5 billion $6.08 billion $4.48 billion

Net Present Value @ 8% $428 million $236 million $2.22 billion $1.61 billion

Net Present Value @ 10% $246 million $97 million $1.77 billion $1.27 billion

Based on Probable Mineral Reserves resources of 14,539,167 tonnes defined from January, 2011 updated resources ,including high-grade subzones.

Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $46.33, ZrO₂ = $3.77, Nb₂O₅ = $55.86, Ta₂O₅ = $255.63 20 Mine Life 1 year ramp up to full 2 000 tpd production rate

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20 Mine Life. 1 year ramp-up to full 2,000 tpd production rate.

Schedule to Production in 2016

Aboriginal EngagementQ1 Q2 Q3Q3 Q4 Q1Q1 Q2 Q3 Q4 Q1 Q2 Q4

2015Q1 Q2 Q3 Q4

2016Thor Lake Project Schedule

2010 2011 2012 2013 2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q2 Q3 Q4

Aboriginal Engagement

Final Pre-feasibility Report

File Permit Applications

Environmental Assessment

Bankable Feasibility Study BudgetSept. 1, 2010 to Aug 31. 2012= $46 million

Ministerial Approval

Land Use/Water permits

Flotation Pilot Plant Testing

H d M t Pil t Pl t T tiHydroMet Pilot Plant Testing

Bankable Feasibility Study

Final Designs & Financing

Project Construction

Project Start-up

Production & Sales

Market Development

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Environmental Concerns: U i & Th iUranium & Thorium

All Rare earth deposits contain some Uranium (U) and Thorium (Th) but p ( ) ( ) there are no other hazardous materials in the ore.

Nechalacho U & Th content is exceptionally low averaging 23ppm U (background levels) and 114ppm Th (mildly elevated) in high grade ore(background levels) and 114ppm Th (mildly elevated) in high grade ore

Levels are safe for mining and processing activities and no water issues due to insolubility

Th is concentrated with the rare earths and does not go to mine tailings

Levels do not invoke additional permitting requirements from Canadian Nuclear Safety Commission or special transport regulationsNuclear Safety Commission or special transport regulations

Proposed Hydromet facility is on a brownfields mining site and will use historic open pits for waste disposal. Th will be diluted to safe levels

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ThO2 content comparison in i REE d itvarious REE deposits

Nechalacho

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Competitive Advantages with th i REE dother emerging REE producers

Relatively Advanced: At Feasibility Study stageAll i di i i h b ff kAllows company to enter into discussions with customers about off-take

First Mover Advantage is KeyFirst to market will capture available market shareFirst to market will capture available market share

Only room for a handful of new producers “first come, first served”

Metallurgical Flowsheet DeterminedVery low Uranium and Thorium

Good recoveries confirmed (75%)

Pilot plant test work underwayot p a t test o u de ay

Heavy Rare Earth Enrichment Marketing OpportunityNo other advanced projects have all the heavies to offer by 2015-16

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REE COMPARABLES: Market Capitalization Normalized to TREO Resources

Company Market cap US$ Millions

Million tonnes TREO*

US$/tonne TREO StageUS$ Millions TREO TREO

Molycorp $4,776 1.3950 $3,423 Production / expansion

Lynas Corporation $3,643 1.1640 $3,130 Construction

Rare Element Resources $450 0.55 $818 Prefeasibility

Arafura $277 0.84 $329 Feasibility

Quest Rare Minerals $341 0.976 $350 Prefeasibility

Avalon Rare Metals $608 4.298 $141 Feasibility

(Market data and FX as of July 13, 2011)* Based on published information/reports

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Also, the market has yet to fully recognize the value of Avalon’s heavy rare earths

Future Milestones and Value D i f A l i 2011Drivers for Avalon in 2011

Completion of flotation pilot plant workCompleting definitive agreements with off-p g g take/ strategic partnersDefining the HREE separation plant locationg p p Finalizing Aboriginal Participation AgreementsAgreementsUpdated resource estimates for 2011 drilling

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What are Rare Earth Elements? What are Rare Earth Elements?

Light REE:La = LanthanumLa = LanthanumCe = CeriumPr = PraseodymiumNd = NeodymiumSm = Samarium

Heavy REE:Eu = EuropiumGd = GadoliniumTb = TerbiumTb = TerbiumDy = DysprosiumHo = HolmiumEr = ErbiumTm = ThuliumYb Y biYb = YtterbiumLu = LutetiumY = Yttrium

Neodymium Dysprosium Terbium and Europium in highest demand

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Neodymium, Dysprosium, Terbium and Europium in highest demand

26

NECHALACHO METALLURGY

Metallurgical testing at SGS Minerals Lakefield Under supervision of John Goode, P.Eng, Consulting Metallurgist p , g, g g

Flotation bench scale testing completeConcentrate with REE, Nb, Ta, Zr at about 5X concentrationREE content approx. 10%, present recoveries: 80-85%Gangue minerals (silicates, etc.) ~40% of concentrate

Mini-pilot flotation plant (4-5 tonnes) trial in progress at XPSMini-pilot flotation plant (4-5 tonnes) trial in progress at XPS

Hydrometallurgical flowsheet defined (90% TREO recovery)“Cracking” of minerals completeg pSeparation procedure for REE, Zr, Nb, Ta designedMini-Pilot plant work to begin when flotation work complete

F ibilit St d Pil t Pl t k 30 t l (H2 2011)

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Feasibility Study Pilot Plant work on 30 tonne sample (H2 2011)

REE Mineral concentration

Grind to 37 µm Mill DeslimingCyclones

REE Mineral concentration

Deslime (~8 µm)

Cyclones

Magnetics removal

Rougher flotationMagnetic Separator

Cleaner flotation

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Gravity concentration

HydrometallurgyHydrometallurgyAcid (H2SO4) bake (~200C)

REE SolutionResidue (zircon, columbite, gangue)

Precipitate bulk LREE+50% HREECaustic (NaOH) crack (~600C)

Acid (HCl) solution 50% HREE, Nb, Ta, Zr

Combined REE productSeparate HREE Nb -Ta Zr

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Rare Earth Separation Plant Recoveries: 74% TREO, 80% Zr

Nechalacho REE Deposit

N-S Composite Section (looking west)

Nechalacho REE Deposit

U LREE Z

Tardiff Lakes Area Indicated resources

Upper LREE Zone170m

1590m

Basal HREE ZoneAverages 30 m thick, 2% TREO 20% HREE

Hole 70: 1.90% TREO with 32.6% HREO

Hole 154: 1.88% TREO

1590m

TREO, 20% HREE over 6.0 metres with 20.5% HREO over 20.0 metres Drill Hole with

Basal Zone

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Intercept

Nechalacho Deposit: NI 43-101Resources Updated Jan 27 2011Resources Updated Jan. 27, 2011

Tonnes (millions)

%TREO

%HREO

%HREO/TREO

%ZrO2

%Nb₂O₅

ppmTa2O5

TREO equiv

Basal ZoneBasal Zone

Indicated 57.49 1.56 0.33 20.72 2.99 0.40 396 2.01

Inferred 107.59 1.35 0.26 18.97 2.83 0.37 354 1.77

U ZUpper Zone

Indicated 30.64 1.48 0.15 10.26 2.10 0.31 192 1.86

Inferred 119.29 1.26 0.13 10.15 2.41 0.35 209 1.66

Prepared initially from 2009 data by Scott Wilson RPA for Technical Report filed July 29, 2010. Updated for 2010 drilling by Finley Bakker, P.Geo., Sr. Resource Geologist

Total Inferred 226.88 1.30 0.19 14.33 2.61 0.36 278 1.71

Mineral Resources based on following price assumptions: US$21.94/kg TREO, US$3.76/kg ZrO2, US$130/kg Ta2O5, and US$45/kg/Nb2O5 and are estimated using a Net Metal Return (NMR) cut-off value of CAN$260/tonne. (CAN:USD FX $1 11/$1 00) NMR i d fi d th i it l f ll th bl t l i th

31

$1.11/$1.00) NMR is defined as the in situ value of all the payable rare metals in the ore net of estimated metallurgical recoveries and processing costs

Basal Zone Indicated Resources atVarious NMR Cut-offs (43-101 compliant)updated Jan. 27, 2011Undiluted grades

INDICATED Tonnes TREO HREO/TREO % % ppm TREO INDICATEDNMR CUTOFF

Tonnes(Millions)

TREO%

HREO/TREO%

%ZrO2

%Nb₂O₅

ppmTa2O5

TREO equiv

≥$260 57.49 1.56 20.72 2.99 0.40 396 2.01

≥$400 39.79 1.77 22.15 3.41 0.45 448 2.28

Prepared from 2009 data by Scott Wilson RPA detailed in Technical Report filed July 29

$

≥$600 14.67 2.19 24.68 4.22 0.53 552 2.80

≥$700 7.26 2.43 25.97 4.64 0.58 621 3.10

Prepared from 2009 data by Scott Wilson RPA detailed in Technical Report filed July 29, 2010 and updated for 2010 drilling by Finley Bakker, P. Geo., Sr. Resource Geologist

Mineral Resources are estimated using price forecasts for 2014 for rare earth oxides prepared early in 2010. Some prices are higher and some are lower than current prices.

Mineral Resources NMR price assumptions (2010): US$21.94/kg TREO, US$3.76/kg ZrO2, US$130/kg Ta2O5, and US$45/kg/Nb2O5 .

NMR is defined as the in situ value of all the payable rare metals in the ore net of

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NMR is defined as the in situ value of all the payable rare metals in the ore net of estimated metallurgical recoveries and processing costs $US FX rate: $1.11. The 2010 base case NMR is C$260/tonne.

Senior Staff and Technical C lt t Consultants

David Trueman, Ph.D., P.Geo, Rare Metals Consulting Geologist

Ian M. London, P. Eng. Energy and Market Development Consultant

John Goode, P.Eng. Senior Metallurgical Consultant

Hoe Teh, P.Eng., Metallurgical Consultant , g , g

Chris Pedersen, P.Geo, Senior Geologist, Camp Manager

Martin Heiligmann, Ph.D., Project Geologist

Finley Bakker P Geo Senior Resource GeologistFinley Bakker, P.Geo. Senior Resource Geologist

Brian Delany, P.Eng., Senior Project Manager

Rob Prasad, Senior Human Resources Coordinator

Dezhi Qi, P.Eng. Process Engineer

Stanley Chan, Eng, EIT. Mine Engineer

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External Consultants External Consultants

SGS Lakefield Research, Metallurgy & MineralogyRoscoe Postle Associates Inc Independent Engineering Roscoe Postle Associates Inc., Independent Engineering and Resource ConsultantsSNC Lavalin Inc., Separation Plant EngineeringKaz Machida, REE Market Development AsiaMcGill University, (Dr. A.E. Williams-Jones) Geological ResearchResearchEBA Engineering, Permitting and Environmental ConsultantsFL Smidth, Engineering and Design, Flotation PlantXstrata Process Support, Metallurgical Testwork Support

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Vision StatementVision Statement

To be the leading integrated supplier of technology metals To be the leading integrated supplier of technology metals and minerals for a more sustainable world.

Mission Statement

Maximize shareholder value by being the first to market with a new supply of heavy rare earths, by providing superior customer service and by being a leader in socially superior customer service and by being a leader in socially responsible mineral production.

35

First Nations Community Engagement & CSREngagement & CSR

Community information sessions and site visitsAboriginal Training

First Aid, Driller Helper

Employment at siteEmployment at site40% Aboriginal

Business developmentMajor contractors with Major contractors with Aboriginal ownershipIce road haulage, airstrip Wind power evaluation

Helped start a new core box business with Deninu Kue

Signed MOUs (Negotiation Agreement) with three FN’s

36

Agreement) with three FN s

Rare Metals: Key Enablers of Cl T h lClean Technology

Rare earth elements (“REE”) such as Neodymium, Terbium ( ) y , and Dysprosium; & other rare metals such as Lithium, Gallium, Indium (+Tin), Niobium, Tantalum, Zirconium

C i i l h hi fil ( l ) d hi h h Creating new materials such as thin films (solar) and high strength magnets, the key to energy-efficient electric motorsRenewable energy: solar power, wind turbines, nuclear powerLED lighting, rechargeable batteries, light weight aerospace alloysHybrid and electric cars (30 kg REE in aggregate)

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Key Facts About Rare Earth Elements or “REE” … 1Elements or REE … 1

Widely dispersed, but rarely concentrated; only found as a group often with uranium & thorium Deposits are not raregroup, often with uranium & thorium. Deposits are not rare.

Typically concentrated in alkaline intrusive rocks (carbonatites) or peralkaline granites (Thor Lake)(carbonatites) or peralkaline granites (Thor Lake)

Many different ore minerals: bastnaesite, allanite, monazite. xenotime, eudialyte, fergusonite, zircon

In most deposits, light rare earths “LREE” are far more abundant than heavy rare earths “HREE”; LREE typically

i 98 99% f HREE f l blcomprise 98-99% of resource...HREE far more valuable

REE must be recovered as a group and sequentially separated; HREE cannot be selectively extracted

38

separated; HREE cannot be selectively extracted

China Dominates Global REE P d tiProduction

China currently produces over 95% of global REE supplyChina now imposing export g quotas and tariffs on REE New non-Chinese supply sources needed to maintain

Mountain Pass era

balanceSupplies of key HREE from China (Y, Dy, Tb) will remain ( , y, ) tight with potential for a complete export banJapan totally reliant on China

REE supplies in China are tightening and Chinese companies are actively trying to acquire additional REE

39

p y for supplies resources around the world.

Demand Growth to 2015 (Source Jacob Securities Jan. 2011)

40

Chinese Rare Earth exports from 1990 t 2011 (E ti t )

Gross volume versus value of exports from 1990 to 2011E

1990 to 2011 (Estimate)

1,400

1,600

60

70

Gross Volume Gross Value

1,000

1,200

1,400

40

50

60

mill

ions

)

's to

nnes

)

400

600

800

20

30

Va

lue

(US

$

Vo

lum

e (0

00'

0

200

400

0

10

VV

1990 2000 2010

41

*Source: Research in China, China Research and Intelligence, Laurentian Bank Securities

1990 2000 2010

South China Ionic Clays: W ld’ P i S f HREEWorld’s Primary Source of HREE

Low grade, but relatively easy to recover by in situ or vat leaching

Uncontrolled, primitive methods causing environmental destruction

Government now curtailing Government now curtailing production for cleanup

50% of mines unlicensed, Government crackdown initiated Government crackdown initiated Spring 2010

In 2008, one-third of total volume exported was reportedly illegally exported was reportedly illegally smuggled out of China

Estimated to be less than 15 years of reserve life

This abandoned mine in Guyun Village in China exhausted the local deposit of heavy rare-earth

elements in three years. Source: NY Times

42

of reserve life

Comparison of Anticipated Production for Major REE DepositsProduction for Major REE Deposits

Nechalacho Mt Weld Mountain PassAvalon

(10 000 tpa)Lynas

(11 000 tpa)Molycorp

(20 000 tpa)

REE OXIDE(10,000 tpa) (11,000 tpa) (20,000 tpa)

Europium Eu 49 48 24Gadolinium Gd 371 107 34Terbium Tb 54 8 -Dysprosium Dy 271 13 -Dysprosium Dy 271 13 -Holmium Ho 48 - -Erbium Er 126 - -Thulium Tm 17 - -Ytterbium Yb 101Ytterbium Yb 101 - -Yttrium Y 1,169 41 20Lutetium Lu 14 - -

Total Heavies 22.20% 1.98% 0.39%

L h L 1 583 2 805 6 640Lanthanum La 1,583 2,805 6,640Cerium Ce 3,572 5,141 9,820Praseodymium Pr 451 585 868Neodymium Nd 1,783 2,035 2,400S i S 391 250 160

43

Samarium Sm 391 250 160Total Lights 77.80% 98.33% 99.44%

Nechalacho REE Deposit:R t P j t Hi tRecent Project History

2005: Acquisition of 100% interest for $300,000 in shares2006: Compilation work mineralogy begin community consultation 2006: Compilation work, mineralogy begin community consultation, recognition of heavy rare earth potential2007: Scoping study, exploration drilling and $16 million equity financing (Research Capital)g ( p )2008: Delineation drilling and 43-101 resource estimate, community engagement and begin metallurgical studies and work on PFS2009: Definition drilling, hydrometallurgical testwork environment, g, y g , market studies $17.5 million financing (CIBC)2010: Definition drilling, begin EIA processJune, 2010: Completion of Prefeasibility Study, p y yJuly, 2011: Update of Prefeasibility Study economics and mineral reserve estimateExpenditures to date: over $38 0 million

44

Expenditures to date: over $38.0 million

Nechalacho REE Deposit:R t P j t Hi tRecent Project History

2005: Acquisition of 100% interest for $300,000 in shares

2006: Compilation work, mineralogy begin community consultation, recognition of heavy rare earth potential

2007: Scoping study exploration drilling and $16 million equity 2007: Scoping study, exploration drilling and $16 million equity financing (Research Capital)

2008: Delineation drilling and 43-101 resource estimate, community d b i ll i l di d k PFSengagement and begin metallurgical studies and work on PFS

2009: Definition drilling, hydrometallurgical testwork environment, market studies $17.5 million financing (CIBC)

2010: Definition drilling, begin EIA process

June, 2010: Completion of Prefeasibility Study

$

45

Expenditures to date: over $27.0 million

Niobium ProductionNiobium Production

Giant Araxa deposit in Brazil (CBMM) produces 80% of p ( ) p

world supply (150,000 tpy Nb2O5)

Nechalacho is now the 3rd largest deposit in the world and will produce 1 700 tpa Nb O as by productwill produce 1,700 tpa Nb2O5 as by-product

Demand increasing for main use in High strength low alloy (HSLA) steels as use of HSLA steels is expected to double

( ) p in next few years

Traditional markets in architecture, ships, bridges.

Increasing use in automotive... Reduces the weight of the vehicle and improves fuel efficiency.

$9 of Nb = 100kg less weight = 1 litre of fuel savings per 100km

46

$9 of Nb 100kg less weight 1 litre of fuel savings per 100km

Zirconium ProductionZirconium Production

Primary zirconium production mainly from zircon sands in y p y Australia and South Africa (1.5 million tpa zircon)

China imports zircon sands and is the only global producer of Zirconium Oxychloride (ZoC) the basic chemical

feedstock for producing Zr metal and other chemicals

Chi i i Z C ti l i t t China increasing ZoC consumption, applying export taxes

Zr Metal critical for nuclear reactors as fuel cladding

Many emerging uses:Hemodialysis treatment (zirconium phosphate)Solid Oxide Fuel Cells (yttrium stabilized zirconia)

47

Solid Oxide Fuel Cells (yttrium stabilized zirconia)

Zirconium Use in DialysisZirconium Use in Dialysis

Zirconium Phosphate can be used for home dialysis treatment. y

The benefits of home dialysis:No time-consuming trips to hospitalM f t t t t ibl More frequent treatments possible, to mimic natural kidney function.More mobility possible for patientsLess costly for government y g

Individual consumption of ZrO2 equivalent is 1lb per treatment, with 3 treatments per week or potential demand of 7,000 tonnes week or potential demand of 7,000 tonnes per year ZrO2 to treat 100,000 patients

Nechalacho will produce 18,000 tpy ZrO2

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Estimated Total Project C t ti C it l C tConstruction Capital Costs

A ti itTotal Capital Cost

E ti tOperating costs over the 18 lif f h j Activity Estimates

(CAD $ 000’s)

Nechalacho Mine 99,607

Thor Lake Process Facility 173 165

18 year life of the project are estimated to average CAN $267 per tonne of ore mined or $5.93 per

Thor Lake Process Facility 173,165

HydroMetallurgical Plant 316,602

Primary Project Component Cost 589,374

kilogram of productBased on Diluted Probable Mineral Reserves of 12.0 million

Project Engineering, Procurement, Construction and Management 80,657

Contingency @ 22% 144,503

Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO₂), 0.42% (Nb₂O₅) and 0.042% (Ta₂O₅)

Sustaining Capital 73,000

Reclamation & Miscellaneous 12,200

Total Project Capital Costs 899,734

(Ta₂O₅)Probable Reserves will increase with continued drilling, also extending the mine life

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the mine life.

Planning for HREE Separation Pl t i N th A iPlant in North America

No large scale heavy REE separation capability outside China at g y p p y present. Customers want an outside China separation solution

Scoping Study by SNC Lavalin assuming S. Ontario location

CAPEX estimated at C$345 million (+/- 35%) for 25,000 tpaHREE separation plant

Sized to accommodate additional supply from other producers Sized to accommodate additional supply from other producers

Delivered cost of reagents accounts for 90% of OPEXLocate plant near sources of HCL and caustic soda

Review of potential sites in progressConsider partnership opportunities

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Key Application of REE Magnets i Wi d T biin Wind Turbines

New GE 4 MW wind turbine uses a 90-ton generator with 2-3 tons of NdFeB permanent magnets to

li i h d f eliminate the need for a gearbox, reducing breakage and energy loss

Permanent magnet generator (PMGs) make the whole assembly (nacelle)

lighter weight allowing higher tower

Already planning to build 10 Red stickman (approx. 6’ tall) shown to demonstrate scale. The wind

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y p g MW size turbines turbine blades on this 4MW model are 176 foot long.

Photo: Popular Science / GE

Project Development phase(+ expected production level and capex)(+ expected production level and capex)Source: Ernst & Young April 2011

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Nechalacho Geological Model E l i Evolving

Blachford Lake Peralkaline Intrusive Complex, NWT

Grace Lake GraniteBiotiteGranodiorite

I d G

Model Section

Leucoferrodiorite

T-Zone

Thor Lake Syenite

Two-Mica

Granite

WhitemanLake Quartz

Syenite

Interpreted Geometryin Cross Section

A i l f l dCaribouLake

Gabbro

Thor Lake SyeniteGranite

Hearne Channeland Mad Lake

Granites

A unique example of a layered Peralkaline intrusive complex, with the upper, rare metal-richpart of the system readily

ibl f i i

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accessible for mining.

Nechalacho Deposit B l Z REE Mi lBasal Zone REE Mineralogy

Heavy REE MineralsFergusonite Y, HREE (Nb,Ta) O4

Zircon Zr (HREE) SiO4

20μm

Light REE Minerals

Bastnaesite (LREE) F CO3 ( ) 3

Allanite (LREE,Ca,Y)2 (Al,Fe)3 (SiO4)4 OH

Synchisite Ca (LREE) (CO3)2 FFergusoniteZi

Monazite (LREE) PO4

REE Y La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu

REE distribution in fergusonite:

Zircon

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Oxide % 29.0 0.30 4.40 1.70 15.6 10.4 1.60 14.3 1.80 9.80 1.20 4.10 0.70 4.40 0.70

Avalon’s CSR culture Avalon s CSR culture

Rare metals products contribute to a more sustainable world

We should produce these materials in a sustainable manner:By being an ethical companyWhich operates with environmental responsibilityWhich operates with environmental responsibilityWith a concern for and commitment to health and safetyWhile contributing to community development and well-being

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Environmental Impacts

Underground Mine (2,000 tpd)

Environmental Impacts

Much smaller environmental footprint than open pit with less waste rock removal and less disturbance of water courses

Tailings will be used for paste back-fill, waste rock for construction

Tailings Disposal Facility

Tailings benign consisting largely ofTailings benign consisting largely of common rock forming minerals quartz feldspar, mica and magnetite (no sulphides)N l b i id ifi d i iNatural basin identified containing

two small ponds with no fish habitatIdeal drainage and discharge

design, inert water chemistry

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design, inert water chemistry

Proposed Mine and Fl t ti Pl t SitFlotation Plant Site

Area of Tailings = 115 ha

Area of Airstrip = 3 ha

Area of Mine = 20 ha

Area

Location of resource, flat-lying, 200 metres below surface accessed

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below surface accessed By ramp from the west.

RESTART Act introduced into U S H f R t tiU.S. House of Representatives

Expedite the permitting process in order to increase the exploration and development of domestic REE sources,

Setting up a Defense Logistics Agency (DLA) REE inventory --where DLA enters into long term supply contracts and then where DLA enters into long-term supply contracts and then makes the supplies available for purchase to federal government contractors -- to generate a domestic market and facilitate the domestic sourcing of rare earth alloys and magnets;domestic sourcing of rare earth alloys and magnets;

Making government-backed loans available to start REE production should lending from capital markets not be available;p g p ;

Requiring cabinet Secretaries to appoint REE Executive Agents

Establishing a REE program at the U.S. Geological Survey

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g p g g y